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The dichotomy between
criminal and civil law. Can civil
penalties be more than just a
remedial hybrid in corporate
regulation?
Maria Farrar
2013
i
DECLARATION OF ORIGINALITY
I, Maria Farrar, hereby declare that this thesis is of my own work and research. It
has not been submitted anywhere else. Where other sources of information have
been used, they have been acknowledged.
Maria Farrar
Dated: November 2013
ii
COPYRIGHT ACKNOWLEDGEMENT
I acknowledge that a copy of this thesis will be held at the Murdoch University
Library.
I understand that, under the provisions of s51.2 of the Copyright Act 1968, all or
part of this thesis may be copied without infringement of copyright where such a
reproduction is for the purposes of study and research.
This statement does not signal any transfer of copyright away from the author.
Maria Farrar
iii
ACKNOWLEDGEMENTS
I would like to acknowledge and thank both of my supervisors, Lorraine Finlay
and The Hon. Michael Murray QC, for helping me during the development of this
thesis. I am forever grateful for the time and dedication spent by my supervisors
in mentoring me throughout this challenging journey. They have both been such
an inspiration to me that this thesis would not have been possible without their
continuous guidance.
I would also like to thank my family, friends and many of the lecturers at the
Murdoch University Law School for their support and encouragement throughout
my entire degree.
iv
ABSTRACT
The traditional distinction between criminal law and civil law in the common law
jurisdiction has been increasingly distorted. There is now a growing concern to
suggest that such a differentiation is no longer obvious in today’s society. The
use of Blackstone’s Commentaries to describe the two divisions of law as public
wrongs versus private wrongs may appear to lack contemporary application
especially in dealing with corporate regulation.
In Australia, the Corporations Act 2001 (Cth) uses civil penalties as a form of
strategic regulation of corporate conduct. It is viewed as an alternative to criminal
prosecution or civil redress for corporate wrongdoing. For this reason, civil
penalties are often referred to as a hybridisation of the criminal and civil law.
Arguably though, they exhibit remedial aspects of both criminal sanctions and
civil compensation. Unfortunately, many civil penalty proceedings have
presented with procedural problems during the course of litigation. Therefore, it
is suggested that the time is right for legislative intervention in developing a new
procedural rule specifically for civil penalty proceedings.
This thesis explores the development of civil penalties and suggests that it should
be formally recognised as a third branch of substantive law. It is argued that it
deserves its own procedural rule in order to serve its purpose in corporate
regulation. This thesis also attempts to point out the hidden dangers which could
render civil penalties unconstitutional by infringing Chapter III of the
Constitution. This could occur if parliament tries to usurp their power onto the
v
judiciary by introducing a mandatory imposition of penalties or disqualification
orders into the legislation. Then the court will be subjected to the will of the
government and its independence in the exercise of judicial power. Although
there are currently very few constitutional challenges to the existing civil penalty
provisions under the Corporations Act, the High Court is re-developing the
jurisprudence of the Kable principle in contemporary civil legislation. It appears
to be an unsettled area of law which could affect the way civil penalties operate in
the future if amendments are made to include mandatory terms.
vi
TABLE OF CONTENTS
I. Introduction .................................................................................................... 1
II. Part I – The Dichotomy between Criminal and Civil Law ............................ 3
A. The Historical Development of Criminal and Civil Law ................ 3
1. The essence of criminal Law ..................................................... 3
2. The philosophy and theory behind civil law ............................. 7
3. The blurring of criminal and civil law ..................................... 11
B. The Nature of Civil Penalties – Evolution of a Hybrid Territory . 14
1. The rise of civil penalties – an appropriate choice against
corporate wrongdoing ............................................................ 14
2. The role of civil penalties as an enforcement regime in
Australia .................................................................................. 20
3. The hybrid characteristics of a civil penalty – having the best of
both worlds? ............................................................................ 23
4. Can civil penalty provisions be substantive in nature ............. 25
C. The Growing need to establish a new civil penalty procedure ...... 29
5. The pitfalls of using civil procedure in civil penalty
proceedings – a lesson learnt from the case of Rich v ASIC .. 29
6. Is it appropriate to apply the civil standard of proof in civil
penalty contraventions? ........................................................... 39
7. Proposed models of a civil penalty procedure ......................... 47
vii
III. Part II – Exploring the Constitutional Validity of the Corporations Act ..... 53
A. Defining constitutional invalidity .................................................. 53
8. Infringing Chapter III of the Constitution ............................... 53
9. The rise and fall and possible revival of the Kable principle .. 55
B. Examples of constitutional challenges to the Corporations Act ... 65
10. The case of Saraceni v Jones .................................................. 65
11. The case of Visnic v ASIC ....................................................... 67
C. Potential dangers for future drafting or amendments to civil penalty
provisions in the Corporations Act ............................................... 71
IV. Conclusion ................................................................................................... 75
V. Bibliography ................................................................................................ 77
1
I. INTRODUCTION
In the common law jurisdiction, it has long been recognised that there is a distinct
division between criminal and civil law. Although the separation of law into these
discrete branches may be useful for determining which procedure to follow in
litigation, the real issue of maintaining such a distinction depends on whether this
strict categorisation of law provides benefits to the society. There are now various
debates about whether this strict separation of law has become blurred by the
introduction of civil penalties as a regulatory tool.1 This is because civil penalties
have been recognised as a ‘remedial hybrid’2 which exists as a statutory invention
to regulate corporate conduct in today’s world of corporate dominance. It appears
that our society has changed and developed in such way that corporate
wrongdoing inevitably becomes a public wrong as oppose to a private wrong due
to the constant interactions between corporations and the community.
Yet the term ‘civil penalties’ itself can have an ambiguous interpretation. Does
one place emphasis on the word ‘penalties’ so that it can be seen as exerting a
punitive effect on the corporate wrongdoer? Or does one focus on the use of the
term ‘civil’ to stress that it is a civil restoration of a private wrong?3 Specifically,
under the Corporations Act 2001 (Cth), does the use of civil penalty provisions
achieve the best characteristics of both criminal and civil sanctions in punishing
and deterring against corporate fault? Or do they only give the illusion of a more
satisfactory outcome in redressing corporate wrongs, especially when some argue
1 Kenneth Mann, 'Punitive Civil Sanctions: The Middleground Between Criminal and Civil Law'
(1991) 101 Yale Law Journal 1795. 2 Australian Law Reform Commission (ALRC), 'Principled Regulation Report - Federal Civil and
Administrative Penalties in Australia ' (Report No 95, 2002) 73 [2.47]. 3 Anne Rees, 'Civil Penalties: Emphasising the Adjective or the Noun' (2006) 34 Australian
Business Law Review 139.
2
that they are only a means of providing community protection as a form of non-
punitive sanction?4 Furthermore, the use of civil penalties to curb corporate
misconduct has been problematic due to the use of civil procedure to litigate
disputes.5 However, there is an element of concern in respect to the constitutional
validity of civil penalties if future amendments are made to impose mandatory
penalties or disqualification orders once a contravention of the civil penalty
provisions has been declared by the courts. Such a proposition will undoubtedly
appear to infringe Chapter III of the Constitution by removing the discretionary
nature of the court and converting it into an instrument of the executive.
This thesis is divided into two parts. Part I aims to explore the jurisprudence
behind the development of civil penalties within the context of the Corporations
Act and suggests that such a novel invention ought to be reclassified as a third
branch of law with its own set of procedural rules for litigation purposes.
However, Part II of the thesis takes on the additional constitutional theme and
discusses the various doctrines that are in place to ensure that any future drafting
of or amendments to civil penalty provisions in the Corporations Act will
withstand a constitutional challenge by the litigants.
4 There has been much discussion as to what is the nature of the penalty in civil penalty provisions
under the Corporations Act, which will be discussed in detail in this thesis. 5 Numerous criticisms have been made against the use of civil procedure rules for civil penalty
proceedings. This area will be explored in depth in part C of the thesis.
3
II. PART I - THE DICHOTOMY BETWEEN CRIMINAL AND CIVIL LAW*
A. The Historical Development of Criminal and Civil Law
1. The Essence of Criminal Law
The essence of criminal law is commonly recognised as a means to prohibit
individual wrongdoing for the protection of public interest by way of
punishment.6 The theory of punishment was noted in the works of Plato (c 427 –
347BC), who described the two key elements of punishment to be corrective and
deterrent.7 Although this may be an oversimplification of what the criminal law
entails,8 ultimately the law is there to provide a sense of justice to mankind.
Indeed, natural law theorists like Augustine contends that, ‘a law that is unjust
would not seem to be a law at all’.9 It is also interesting to observe that in
Augustine’s book, City of God, a comparison is drawn between the laws of a
kingdom and the rules in a criminal gang. The use of this imagery conveys a
strong sense of morality as a guiding principle in determining whether law in
general should be obeyed or not. Subsequently, this led to the supportive theory
of using moral judgements and moral blameworthiness to further the development
of criminal law from a philosophical perspective, so that it reflected ‘the spirit of
*Civil Law described in this paper is in the sense of the law that is opposed to or distinct from the
criminal law in common law jurisdictions. 6 Andrew Ashworth, Principles of Criminal Law (Oxford University Press, 5th ed, 2006) 1.
7 J M Kelly, A Short History of Western Legal Theory (Oxford University Press, 1992) 31.
8 Ibid 33. Especially as Plato also describes the various aspects of voluntary and involuntary
wrongs, which is attributed to the offender’s state of mind or an element of fault (mens rea) in
modern day criminal offences 9 Jonathan Crowe, Legal Theory (Thomson Reuters (Professional) Australia Ltd, 2009), 24 – citing
Saint Augustine in Book I, Part V of ‘On Free Choice of the Will’.
4
Kantianism within the criminal law [as it] informs this overlap between
judgements in law and in morality’.10
Inevitably, when the domination of Christian belief in natural law began to erode
away and the new wave of legal positivism emerged, the jurisprudence of criminal
law refocused on the original elements of criminalisation such as punishment,
retribution and deterrence. The works of legal positivists such as John Austin
continued to reinforce the punishment aspect of criminal law as noted in his
command theory of law.11
He postulated that, ‘every law or rule is a command or
a species of commands’12
and that, ‘as distinguished from the commands which
may be named occasional or particular, a law is a command, which obliges to a
course of conduct; or which obliges, generally and indefinitely, to acts or
forbearances of a class.’13
Furthermore, a duty is imposed under such obligations
and to disobey the command would mean that you will be ‘liable to evil’.14
The
meaning of evil is elaborated by Austin as he introduces the concept of sanctions
and punishment.
The evil which will probably be incurred in case a command be
disobeyed or (to use an equivalent expression) in case a duty be
broken, is frequently called a sanction, or an enforcement of
obedience. Or (varying the phrase) the command or the duty is said to
be sanctioned or enforced by the chance of incurring the evil.
Considered as thus abstracted from the command and the duty which it
enforces, the evil to be incurred by disobedience is frequently styled a
10
Alan Norrie, 'Legal and Moral Judgement in the "General Part"' in Shaun McVeigh and Alison
Young Peter Rush (ed), Criminal Legal Doctrine (Dartmouth Publishing Company Ltd and
Ashgate Publishing Ltd, 1997) , 2. However, the author argues that the division between legal and
moral judgement in recent times has grown to such an extent that in the extreme case, it paralyses
society’s ability to judge crime (p3). 11
John Austin, The Province of Jurisprudence Determined (Lenox Hill Pub & Dist . Co. (Burt
Franklin), 2nd ed, 1970). 12
Ibid 5. 13
Ibid 27. 14
Ibid 6.
5
punishment. But as punishments, strictly so called, are only a class of
sanctions, the term is too narrow to express the meaning adequately.15
The significance of Austin’s contribution is that it laid down the general
foundation for the ideology of penal sanctions and distinguished it from other
bodies of law, in particular, law that fell into the realm of civil jurisdiction.
H.L.A Hart famously criticised Austin’s theory for creating the notion of ‘orders
backed by threats’,16
which was well suited in justifying the existence of criminal
law, but failed to take into account other classes of law which ‘provide individuals
with facilities for realizing their wishes, by conferring legal powers upon them to
create, by certain specified procedures and subject to certain conditions, structures
of rights and duties within the coercive framework of the law’.17
Nevertheless, despite the influence by scholars of legal positivism on the
expansion of criminal law, the undertone of religious morality was famously
revived by Lord Patrick Devlin in the 1950s, who stated that ‘society may use the
law to preserve morality in the same way as it uses it to safeguard anything else
that is essential to its existence’.18
In essence, Devlin considered that criminal law
was designed to serve the purpose of deterring ‘immoral behaviour’.19
Unfortunately, his theory was also heavily criticised and limited by the fact that
there is no universal set of ‘common morality’,20
especially when the moral
attitudes of society changed as time went by. Yet, it has been said that the need
15
Ibid 8. 16
H.L.A.Hart, The Concept of Law (Oxford University Press, 1961) 27. 17
Ibid. Some examples of these include law of marriage and constitutional law, as the threat of
sanctions are not fundamental on the duty to obey such laws. 18
From a series of lectures in the 1950s which was subsequently published in the book: Lord
Patrick Devlin, The Enforcement of Morals (Oxford University Press, 1965) 11. 19
Mark Finlay, Stephen Odgers and Stanley Yeo, Australian Criminal Justice (Oxford University
Press, 2009)3. 20
Mirko Bagaric, 'The "Civil-isation" of the Criminal Law' (2001) 25 Criminal Law Journal 184,
188.
6
for criminal law in society is to provide a deserved response to culpable
wrongdoing.21
However, if the overall purpose of having criminal law is to
prevent potential harmful behaviour to others in society,22
then the difficulty
arises when determining what is considered to be ‘harmful’ and how could it be
measured.23
Obviously, punishment can have a moral or educative effect24
beyond just simple deterrence, especially when considering more conventional
crimes such as murder and rape. This thought of re-educating the offender has
emerged as a concept of rehabilitation during the last 150 years,25
and perhaps,
lessens the harsh view of punishment in that it may be seen as a means to prevent
recidivism. Therefore, it appears that some of the above mentioned underlying
principles of criminal law were subsequently encapsulated in the theory of
criminalization, whereby it aimed to provide a ‘set of conditions under which the
state is permitted to resort to punishment’.26
We now turn to the ideology behind
civil law in an attempt to contrast its mode of usage with the criminal law.
21
Ashworth, above n 3, 17. 22
Finlay, Odgers and Yeo, above n 19, 3; Kelly, above n 7, 294-295. 23
Simon Bronitt and Bernadette McSherry, Principles of Criminal Law (Lawbook Co, 2nd ed,
2005) 52-53. 24
Torstein Eckhoff, 'Justifications of Punishment' in Antony Duff and Nigel Simmonds (ed),
Philosophy and The Criminal Law (Franz Steiner Verlag Wiesbaden GmbH, 1984) 13. 25
Ibid 12. 26
Douglas Husak, Overcriminalization The Limits of the Criminal Law (Oxford University Press,
2008) 77; Douglas Husak, 'Criminal Law Theory' in Martin P. Golding and William A.
Edmundson (ed), The Blackwell Guide to the Philosophy of Law and Legal Theory (Blackwell
Publishing, 2005) 110-111.
7
2. The philosophy and theory behind civil law
A simplistic overview of describing the law in the civil justice system is that it is
anything that is not criminally enforceable by the State. Perhaps a generalisation
of the difference between criminal and civil law is that ‘criminal law is designed
to punish and the civil law to compensate for [the] harm caused’.27
This
distinction is concisely summarised by Williams in that,
[t]he difference between civil law and criminal law turns on the
difference between two different objects which law seeks to pursue -
redress or punishment. The object of civil law is the redress of wrongs
by compelling compensation or restitution: the wrongdoer is not
punished; he only suffers so much harm as is necessary to make good
the wrong he has done. The person who has suffered gets a definite
benefit from the law, or at least he avoids a loss. On the other hand, in
the case of crimes, the main object of the law is to punish the
wrongdoer; to give him and others a strong inducement not to commit
same or similar crimes, to reform him if possible and perhaps to satisfy
the public sense that wrongdoing ought to meet with retribution.28
If we analyse this passage closely, civil law seems to provide a somewhat superior
solution for the complainant than criminal law as it is primarily concerned with
repairing or providing a remedy for the loss suffered by the individual rather than
punishing the wrongdoer. Although arguably, if the loss incurred by an individual
has ramifications for the general public then the remedies sought in civil law may
serve additionally to exemplify the detriment caused and punitive damages may
be awarded to deter future wrongdoings of a similar nature.
27
(ALRC), above n 2, 67 [2.15]. 28
Geldart William, Introduction to English Law (Oxford University Press, 10th ed, 1991)146.
8
From a historical standpoint, one of the most influential contributions to the
theory of law in the common law jurisdiction is Blackstone’s Commentaries on
the Laws of England. It is here that Blackstone ‘not only saw natural law as
limited to a few core principles but also recognized that civil authorities might
appropriately determine the boundaries of these principles differently in different
places and at different times.'29
Blackstone upheld the thought of public versus
private wrongs and distinguished the two by maintaining that,
[p]rivate wrongs are an infringement or privation of the private or civil
rights belonging to individuals, and are frequently termed civil
injuries. Public wrongs are a breach and violation of public rights and
duties, which affect the whole community, considered as a community,
and are distinguished by the appellation of crimes and
misdemeanours.30
Although Blackstone had his fair share of criticisms, especially from
utilitarian scholars such as Bentham,31
his work has been described by Dicey
as ‘the one treatise on the laws of England and which must for all time
remain a part of English literature’.32
Nonetheless, as seen with the concept behind criminal law, the element of
morality plays a central role in civil law too. However, the view of public
morality is suppressed by the measure of ‘private morality’ and the ‘individual
29
Albert W. Alschuler, 'Rediscovering Blackstone' (1996) 145(1) University of Pennsylvania Law
Review 1, 10. 30
John C Devereux, The Most Material Parts of Blackstone's Commentaries, Reduced to
Questions & Answers (Baker, Voorhis & Co, 1877) 167. 31
Bentham heavily criticised Blackstone’s work as his dedication to utilitarian philosophy meant
that he disagreed with the conservatism that preaches contentment with things as they are - A.V
Dicey, 'Blackstone's Commentaries' (1932) 4(3) The Cambridge Law Journal 286, 292 32
Ibid 294.
9
freedom of choice and action’.33
What this effectively means is that non-criminal
law still has the power and authority to redress and compensate the private wrongs
of the individuals but differs in that the State does not interfere with the
disagreement on a public level for the interest of the society, although it is
arguable that cases that are held with great public interest will be used to as an
example in providing a normative effect. The most obvious example of such is
found in the law of torts, which primarily aims at providing restitution for the
complainant,34
as well as having an interest in offering a deterrent and loss-
spreading effect.35
However, in Seipp’s analysis of the chronological
development in early English common law, he proposed that,
[t]he distinction between crime and tort was not a difference between
two kinds of wrongful acts. In most instances, the same wrong could
be prosecuted either as a crime or as a tort. Nor was the distinction a
difference between the kinds of persons who could initiate the actions.
This conceptual distinction is best presented as a choice.36
Subsequently, Seipp contends that the root of the separation between crime and
tort was to have the choice between ‘vengeance or compensation’.37
The problem
with this suggestion is that it portrays the image that compensation will have a
greater burden on a poor man than a rich man, therefore, it may seemingly pervert
the course of justice in that a rich man can ‘afford’ to break a civil law more
readily than a poor man.
33
Patrick Devlin, 'The Enforcement of Morals' in Michael J Gorr and Sterling Harwood (ed),
Crime and Punishment (Jones and Bartlett Publishers, 1995) 18-19. 34
Todorovic v Waller (1981) 150 CLR 402. 35
Pyrenees Shire Council v Day (1998) 192 CLR 330 at [123]. 36
David J Seipp, 'The Distinction Between Crime and Tort in the Early Common Law' (1996) 76
Boston University Law Review 59, 60. 37
Ibid 84.
10
From a more modern day approach to the philosophy of civil law, H.L.A Hart
insightfully reminds us that justice and morality are necessary features in any law,
as ‘justice constitutes one segment of morality primarily concerned not with
individual conduct but with the ways in which classes of individuals are
treated’.38
Furthermore, he claims that,
the laws which provide for compensation by one person of another for
torts or civil injuries might be considered unjust for two different
reasons. They might, on one hand, establish unfair privileges or
immunities. This would be so if only peers could sue for libel, or if no
white person were liable to a coloured person for trespass or assault.
Such laws would violate, in a straightforward way, principles of fair
distribution of the rights and duties of compensation. But such laws
might also be unjust in a quite different way: for while making no
unfair discriminations they might fail altogether to provide a remedy
for certain types of injury inflicted by one person on another, even
though morally compensation would be thought due.’39
This view illustrates the fact that in the private sphere of civil wrongs, the law that
deals with such contraventions must adequately offer a form of compensation for
the harm done if it is morally right to do so. It seems then some of the underlying
features of civil law and criminal law are not that dissimilar as they both include
aspects of justice, morality, deterrence by using some form of sanction against the
wrongdoer. So the next logical question is to ask whether criminal and civil law
still exist as well-defined divisions of law. Or has the bifurcation of the two
doctrines faded as more and more modern day offences, especially those in the
commercial or corporate world, have been created to be somewhat quasi-criminal
in nature?
38
H.L.A.Hart, above n 16, 159-160. 39
Ibid.
11
3. The blurring of criminal and civil law
In the ancient past, there was little or no need to distinguish between civil and
criminal causes or between crime and tort.40
This is because the law from early
codes did not require such distinctions to be made, merely for the reason that if a
wrong was committed, the wrongdoer would be brought to justice either by means
of corporal punishment, or compensation, and failure to do so may result in the
person being made a slave to repay the debt.41
Lindgren puts forward the view
that ‘the ancients did not need a law of crimes because they often dealt with
murder, assault and theft as private wrongs to be redressed by compensation or
more brutal tort substitutes’.42
In the heart of this view, it is consistent with the
philosophy and reasoning behind both criminal and civil law, in that the focus is
on righting the wrong by means of a sanction and achieving some form of justice
as an outcome. Although Lindgren does maintain that ancient law did have a
distinction between public wrongs and private wrongs,43
it did not amount to the
same concept of blameworthiness and compensation as observed in the modern
day theory of criminal and civil law.
Nevertheless, Professor Mann and his supporters have identified that there is a
paradigm shift towards acknowledging the general blurring between the criminal
and civil law models.44
There are several reasons which can be attributed to this
40
James Lindgren, 'Why the Ancients May Not Have Needed a System of Criminal Law' (1996)
76 Boston University Law Review 30, 34. 41
Ibid 35. 42
Ibid 56. 43
Ibid. 44
Neil Andrews, 'If the Dog Catches the Mice: The Civil Settlement of Criminal Conduct under
the Corporations Act and the Australian Securities and Investments Act' (2003) 15 Australian
Journal of Corporate Law 1, 3; (ALRC), above n 2, 117 [3.53]; Bagaric, above n 20, 192; John
(Jr) C Coffee, 'Paradigms Lost: The Blurring of the Criminal and Civil Law Models - And What
Can Be Done About It' (1991) 101 Yale Law Journal 1875, 1887; Susan R Klein, 'Redrawing the
Criminal-Civil Boundary' (1998-1999) 2 Buffalo Criminal Law Review 679, 680; Mann, above n 1,
1798; Carol S Steiker, 'Punishment and Procedure: Punishment Theory and the Criminal-Civil
12
phenomenon, with the obvious one being the growth and expansion of the
commercial sector which has dominated the change in law and policies during the
last century. Other plausible explanations include the idea of over-criminalization
of law, whereby some would argue that the range of criminal offences is ‘so
diverse that the criminal law is devoid of a justificatory principle,45
while others
suggest that there are limitations for using criminal law to settle civil disputes
especially when there is a lack of fault element in the offence proscribed,46
which
is similar to instances where some criminal offences are comprised of strict or
absolute liability.47
Mann claims that such blurring between the two spheres of
law was attributed to Bentham and the introduction of utilitarian philosophy,
which claims that ‘the object of the law was to manipulate pain and pleasure to
achieve the greatest good, [and] this understanding of law as manipulating
behaviour [is one] that bridged the gap between criminal and civil law’.48
Additionally, he claims that the utilitarian theory also contributed to the
deterrence theory by proposing that people are less likely to commit a wrong if
they knew they will be fined for it than if they were to pay for the wrong as a form
of compensation afterwards.49
In essence, Mann submits that ‘both civil and
criminal law create negative sanctions for wrongful behaviour’,50
but this is no
more surprising than basically accepting a fundamental idea of law, for what else
would be the purpose of having law if it fails to deter and correct wrongful
behaviour in society?
Procedural Divide' (1996-1997) 85(4) Georgetown Law Journal 778, 780; Issachar Rosen-Zvi and
Talia Fisher, 'Overcoming Procedural Boundaries' (2008) 94 Virginia Law Review 79, 82. 45
Bagaric, above n 20, 184. The author argues that ‘most criminal offences are no worse than
civil wrongs…and the decision whether to make an activity a criminal offence appears to be no
more sophisticated than tossing a coin’. 46
Andrews, above n 44, 5. 47
(ALRC), above n 2, 117 [3.53]. 48
Mann, above n 1, 1845. 49
Ibid. 50
Mann, above n 1, 1846.
13
However, Professor Coffee sees the ‘paradigms blur as a form of encroachment of
the criminal law on the civil law’51
and expresses the concern that due to the
discretionary nature in judicial lawmaking, the standard by which decisions are
made will hinder upon ‘the natural desire of judges to leave themselves discretion
and flexibility in future cases’.52
Coffee views this as a problem in that he claims
there is a ‘trend toward[s] the delegation of this discretion in recent legislation
empowering both civil authorities and private individuals to seek quasi-criminal
penalties’.53
This opinion is also mirrored in Professor Klein’s article in light of
the procedural protections offered in criminal trials. The concern raised is that in
the US,
[t]he Court has attempted to maintain the bright line between civil and
criminal actions, taking on a greater philosophical challenge than it can
handle…[given that there has been] recent and enormous increase in
the enactment of, and litigation surrounding, nominally “civil” statues
which impose what appear to be “punitive” sanctions [it] requires a
definitive, or at least intelligible response. Unfortunately, the Court
has been inconsistent both in declaring whether the imposition of
punishment is the feature which marks a given proceeding as
“criminal” rather than “civil,” and in providing a definition or
developing a theory of “punishment”.54
This grim outlook of the Court’s ability to define civil and criminal actions is
somewhat narrow in that it does not seem to take into account that the Court can
only decide on the nature of a case, whether it be civil or criminal, based on the
facts presented, the intention of the legislature and the observance of any
51
Coffee, above n 44, 1878. 52
Ibid 1879. 53
Ibid 1880. The article is based on US case law and a reply to Kenneth Mann’s advocate for
punitive civil sanctions that would largely parallel criminal sanctions. 54
Klein, above n 44, 680-681.
14
precedents from prior case law. Besides, it may simply be that there was no need
to determine the philosophy of whether the case ought to be treated as civil or
criminal if that question does not arise.
Since the dichotomy between criminal and civil law is no longer in debate solely
within the crime/tort arena, the influx of case law that deals with ‘white-collar
crime’ over the last few decades has changed the moral attitudes towards
corporate culpability and regulatory schemes that aim at deterring against future
civil wrongs. I shall now discuss the evolutionary process of the emergence of
civil penalties as a form of middle-ground jurisprudence in the common law
jurisdiction.
B. The Nature of Civil Penalties – Evolution of a Hybrid Territory
1. The rise of civil penalties – an appropriate choice against corporate
wrongdoing
The term ‘white-collar crime’ and ‘corporate crime’ are associated with ‘criminal
offences which are committed by companies and other for-profit organisations
[which] are punished by the State’.55
Corporate crime is said to be broadly
defined as,
a crime committed within the course of one's occupation by persons of
relatively high social status. But in contrast to those white collar
offences, such as embezzlement or misuse of computers for fun or
profit, which are committed by individuals against companies,
corporate crime involves offences committed by companies or their
55
James Gobert and Maurice Punch, Rethinking Corporate Crime (LexisNexis Butterworths,
2003) 11.
15
agents against members of the public, the environment, creditors,
investors or corporate competitors.56
Yet according to Acquaah-Gaisie, white-collar crime and corporate crime should
not be used synonymously as they ought to be distinguished by the individual
versus organisational fault elements of these crimes. He defined ‘white collar
crime [as being] business crime committed for personal gain by an individual who
may be a corporate employee in a position of trust, [while] corporate crime is
committed for a corporation: the proceeds go to the body corporate’.57
Although the term ‘white-collar crime’ was introduced by Edwin H Sutherland in
the United States in 1939,58
it was originally intended as a means to address the
individual criminal behaviour of professional men like business managers and
executives during the course of their occupation, but it was not aimed at describing
their criminal behaviour in terms of conventional criminal offences like murder,
adultery and intoxication, ‘since these are not customarily a part of their
occupational procedures’.59
The issue of using the terminology of ‘white collar
crime’ is that it creates a negative connotation of labelling a person with the
stigma of being a criminal in the traditional sense. In addition, there is the danger
of rendering the individual as being a scapegoat to answer for corporate crimes,
56
Peter Grabosky and John Braithwaite, 'Corporate Crime in Australia ' (1987) (No. 5) Trends and
Issues in Crime and Criminal Justice 1, 2 (Published from the Australian Institute of Criminology;
<http://www.aic.gov.au/publications/current%20series/tandi/1-20/tandi05.html>). 57
Gerald Acquaah-Gaisie, 'Corporate Crimes: Criminal Intent and Just Restitution' (2001) 13
Australian Journal of Corporate Law 219, 219. 58
Gilbert Geis, 'White-Collar Crime: What Is It?' in Kip Schlegel and David Weisburd (ed),
White-Collar Crime Reconsidered (Northeastern University Press, 1992) 32. 59
Ibid 33.
16
especially if they are being pressured into making illegitimate decisions that
ultimately leads to a breach of law.60
In ASIC v Vizard,61
Finkelstine J elaborated on the usage of white collar crime by
suggesting that,
[i]t now has wider scope. Black’s Law Dictionary (8th ed, 2004)
defines “white collar” crime as “[a] non-violent crime [usually]
involving cheating or dishonesty in commercial matters. Examples
include fraud, embezzlement, bribery, and insider trading”. I have also
referred to the widely held view that “white collar” offenders are
treated lightly. The reason seems to be this. Traditional sentencing
holds that factors such as an unblemished past life, a reputation for
honesty, an involvement in and a contribution towards community
affairs, and so on (generally referred to by the umbrella expression
“good character”) are important factors in mitigation of sentence. I do
not wish to deny the relevance of those factors, but in some cases they
may result in the imposition of a very lenient sentence. At any rate
there must be a limit to how far good character can be taken into
account when dealing with a “white collar” offender, especially where
the contravention concerns dishonesty or the abuse of a position of
trust. Those convicted of such offences rarely have a criminal record.
It is their good character that has enabled them to occupy the position
of trust which they have ultimately breached. Indeed, it is their good
character that is often used to facilitate the offence.
…At a general level, corporate crimes committed by prominent
business people have a tendency to erode the moral base of the law and
provide an opportunity for other offenders to justify their misconduct.
At a more immediate level corporate crime is diffuse in its impact, is
easily concealed with seemingly legitimate business transactions and is
60
Gobert and Punch, above n 55, 26. 61
(2005) 145 FCR 57.
17
difficult to detect, control and punish. Corporate crimes are usually
committed to accumulate wealth and power and are almost always the
result of deliberate and calculated conduct. I have said in another
context that, for this kind of offence, it is the nature of the offence rather
than the character of the offender that should be the principal
consideration for the punishment to be imposed: Australian Competition
and Consumer Commission v ABB Transmission and Distribution Ltd
(No 2) (2002) 190 ALR 169. I continue to hold that view.62
The significance of this passage is that Finkelstein J also expresses the concern
that white collar crimes, although encompassing the elements of criminal
wrongdoing, may be portrayed as a less serious offence, especially when
convictions do not necessarily result in the offender having a criminal record. It
seems then punishments for both white collar crimes and corporate crimes are
focused on various aspects of moral wrongdoing as well as the economic
consequences of such wrongs. A further differentiation between corporate crimes
and white collar crimes is that focus is given on the nature of the offence rather
than the individual culprit, and that allegations of corporate crimes are much more
difficult to prove.
Hence the predicament of holding corporations responsible for corporate crimes
will often arise as a result of failing to convict the individual offenders, based on
one of the inherent elements associated with the criminal law, such as moral
blameworthiness.63
Despite the acknowledgment that a corporation exhibits the
status of having a separate legal entity, the difficulty in attributing blame to this
legal fiction is that if an organic theory approach is used to identify the person
62
Ibid 65-66 [36]-[37]. 63
Gobert and Punch, above n 55, 46.
18
responsible for the offence, it may seem to disseminate or decentralise the
accountability of the corporation.64
Therefore, to combat this drawback, Australia
has adopted the concept of organisational blameworthiness whereby vicarious
liability and ‘corporate culture and policy as expressing corporate intention or the
fault element of the offence is embodied (to some extent) in the corporate criminal
responsibility provisions of the Criminal Code’.65
Although this appears to be
somewhat a solution to the problem of attributing corporate blame, it does not
address the issue of corporate punishment and the subject of deterrence.
On the subject of deterrence, Simpson has observed that there has been a lack of
empirical research performed over the years to show that corporate legal sanctions
actually produce a significant impact on the level of deterrence against corporate
crime.66
However, she noted that ‘corporate decisions appear to involve more than
rational choices – they have moral components as well’, but ‘morality is
situational, always in flux, changing along with social relations and networks
within the organization’.67
This view reflects the general difficulty in using moral
blameworthiness in the course of justifying the punishment or sanctions applied to
corporate crimes, which may not necessarily provide the effect of deterrence.
Simpson subsequently presents the dilemma of what is perceived when a company
faces unethical managers, who contravene the law not for their own personal gains
but supposedly for the good of the company. Notwithstanding that their
objectionable behaviours are viewed less harshly and often non punitive remedies
64
Australian Law Reform Commission (ALRC), Securing Compliance: Civil and Administrative
Penalties in Australian Federal Regulation – 16. Corporate Responsibility, Discussion Paper No.
65, (2002) [16.24]. 65
Ibid [16.33]. 66
Sally S. Simpson, 'Corporate-Crime Deterrence and Corporate-Control Policies Views from the
Inside' in Kip Schlegel & David Weisburd (ed), White-Collar Crime Reconsidered (Northeastern
University Press, 1992) 290. 67
Ibid 291.
19
are sought over criminal sanctions, ‘quizzing managers about the ethical choices
they make while on the job leads one to conclude that managers do not think in
deterrence terms...[but] when they do, it is only for traditional occupational
offences like embezzlement, bribery, employee theft and not corporate offences’.68
This line of thought suggests that using criminal law to punish corporate offences
may not necessarily provide a deterrent effect against corporate crime as compared
to deterring against an individual from committing a white-collar crime.
In contrast, if enforcement of corporate responsibility rests under the civil justice
system and civil remedies are used to correct the detriment and possibly provide a
form of deterrence against future harm, then it brings back the impression that
wrongful acts by corporations are less culpable and less serious than a
conventional crime. So again, similar to the analogy of Seipp’s crime/tort
distinction,69
the image it conveys to the public is that it is acceptable for a rich
man, or a wealthy organisation in this case, to pay for their mistakes rather than
suffer some form of punishment from the State, thus making corporate
wrongdoings less blameworthy.
Given that the two diametrically opposing impositions of traditional criminal and
civil sanctions appear to provide an unsatisfactory outcome against deterring
against corporate wrongdoing, it is a logical step to evoke a hybrid form of
sanction in order to serve a more meaningful approach in dealing with corporate
liability. It is at this point that the introduction of a ‘civil penalty’, which exhibits
the traits of both criminal and civil sanctions, seem more fitting in combating
68
Ibid 303. 69
Seipp, above n 36.
20
corporate misconduct and has proven to be a popular choice in Australia and the
rest of the world.
2. The role of civil penalties as an enforcement regime in Australia
The use of civil penalties as a tool for regulators to exert compliance in the
corporate world has been implemented under Part 9.4B of the Corporations Act
since 1993. Prior to its introduction, only criminal sanctions and civil remedies
were available for addressing corporate fault. When the Cooney Committee
produced a report that strongly recommended the government enact civil penalty
provisions as a necessary enforcement mechanism to provide effective regulation
of corporate law,70
it was based on the model of responsive regulation. The theory
behind such regulation was attributed to Professor Braithwaite’s proposal in that,
strategic regulation theory provides a broad perspective on the role of
enforcement sanctions in securing regulatory compliance. The theory
advocates regulatory compliance as best secured by persuasion rather
than legal enforcement. The economic premise behind this view is
that persuasive measures are less costly than enforcement measures.
For persuasion to be effective, however, the threat of punishment must
lie behind the regulator’s conciliatory actions or gestures. This threat
should consist of a set of integrated sanctions, which the regulator can
enforce when a contravention occurs. The sanctions should escalate in
severity in proportion to the nature of the contravention.71
70
Senate Standing Committee on Legal and Constitutional Affairs, Parliament of Australia
produced the report, commonly known as ‘Cooney Report’ on Company Directors’ Duties: Report
on the Social and Fiduciary Duties and Obligations of Company Directors (1989). 71
Helen Bird and Ian Ramsay George Gilligan, 'Civil Penalties and the Enforcement of Directors'
Duties' (1999) 22(2) University of New South Wales Law Journal 417, 425-426.
21
Effectively, this is seen as the ‘enforcement pyramid’ where the range of sanctions
would start from ‘civil measures at the base of the pyramid…and criminal liability
at the apex for the more exceptional instances of law-breaking’72
in the corporate
world. It was argued that ‘the perceived harshness of the criminal penalties may
have discouraged persons who would otherwise be competent directors from
taking on that role…[thus] criminal liability should flow only when the conduct
was genuinely criminal in nature’.73
Naturally, this enabled civil penalties to sit in
the middle of the two sanctions as an extra means to deter corporate wrongdoing.
Gething also showed support for the need to have both criminal and civil penalties,
so that ‘the court has ample scope to ensure that a proportionate sanction can be
given in the circumstances of every contravention’.74
He concluded that such an
enforcement regime provided an ‘effective and just balance between the regulatory
and business facilitation aims of the ASC’.75
Although the introduction of civil penalty provisions was initially limited to the
scope of directors’ duties, the extent of the regime has since grown to encompass a
range of provisions in corporations’ law over the last few years.76
However,
recent empirical research has suggested that there has been a gap between the
theory of responsive regulation and practice, as it was discovered that
ASIC does not consider whether or not a civil penalty application
would be an adequate regulatory response prior to considering a
72
Cooney Report, above n 70, 190 – citing Professor Fisse. 73
Michelle Welsh, 'ASIC, Civil Penalties and Compensation Orders Under the Corporations Act
2001' (2003) 17(4) Commercial Law Quarterly 13, 14. 74
Michael Gething, 'Do We Really Need Criminal and Civil Penalties for Contravention of
Directors' Duties?' (1996) 24(5) Australian Business Law Review 375, 376. 75
Ibid 390. ASC is the Australian Securities Commission, now known as ASIC, the Australian
Securities and Investments Commission. 76
Robert Baxt, 'The Expansion of Civil Penalties under the Corporations Act' (2002) 30 Australian
Business Law Review 61, 61.
22
criminal prosecution and that ASIC does not initiate more civil penalty
proceedings than criminal prosecutions in relation to the same types of
contraventions.77
In addition, there have been a growing number of concerns and criticism78
over the
lack of success in using civil penalties to deter and punish corporate wrongdoers
especially when ASIC has failed to prove their case in a highly complex trial like
ASIC v Rich79
. This leads one to speculate that perhaps civil penalties are not as
desirable as an effective enforcement regime against corporate fault as it first
appeared to be. Nevertheless, it is difficult to determine whether these
unsuccessful cases, from the regulator’s perspective, was due to any intrinsic
defect aligned with the provision itself or if it is in fact due to the hybrid nature of
the penalty that has subsequently posed undesirable outcomes when civil
procedure is used to trial such proceedings. It is appropriate at this stage to
consider the features of civil penalty in an attempt to understand the jurisprudence
behind this novel sanction.
77
Michelle Welsh, 'Civil Penalties and Responsive Regulation: The Gap between Theory and
Practice' (2009) 33 Melbourne University Law Review 908,933. 78
Vicky Comino, 'Effective Regulation by the Australian Securities and Investments Commission:
The Civil Penalty Problem' (2009) 33 Melbourne University Law Review 82; Vicky Comino,
'Towards Better Corporate Regulation in Australia' (2011) 26 Australian Journal of Corporate
Law 6. 79
(2003) 45 ACSR 305. This case was appealed all the way to High Court and specifically dealt
with the question of privilege against penalties. It subsequently led to the abrogation of this
common law principle in 2007 when s 1349 was introduced. A detailed discussion of this case is
discussed in Part III of this paper.
23
3. The hybrid characteristics of a civil penalty – having the best of both worlds?
In Australia, the use of civil penalty has originated since the enactment of the
Customs Act 1901, with its main purpose being to regulate Customs prosecutions
as a form of debt to the Crown.80
However, since the expansion of its use towards
the latter part of this century81
primarily in the Commonwealth jurisdiction, many
academics have adopted the view of defining civil penalties as ‘punitive sanctions
that are imposed otherwise than through the normal criminal process.’82
The
ALRC has also classified three types of civil penalty processes:
1. civil penalties which sit alongside criminal penalties in legislation
as additional or alternative enforcement options, often when the
necessary fault element to prove a criminal offence (usually
intention or knowledge) is not present, such as under the
Environmental Protection Biodiversity Conservation Act and Part
9.4B of the Corporations Act,
2. separate civil penalty schemes which sit alone as the penalty for
certain contraventions, such as Part IV of the Trade Practices Act;
and
3. those which have a quasi-criminal status but use civil procedures,
such as Customs prosecutions, and involve features of both
criminal prosecution and civil penalty proceedings.83
It is quite evident from observing these terms that a civil penalty displays the
features of both criminal and civil sanctions in that they can adopt the
characteristics of a punishment, not dissimilar to a criminal penalty, yet still use
80
(ALRC), above n 2, 74 [2.53]. 81
Matthew Lees, 'Civil Penalties and Procedural Protection' (2013) 87 Australian Law Journal
404, 405. 82
Michael Gillooly and Ni Lante Wallace-Bruce, 'Civil Penalties in Australian Legislation' (1994)
13 University of Tasmania Law Review 269, 269. 83
(ALRC), above n 2, 77-78 [2.63].
24
civil procedure as a basis for trial. Although not all legislation will specify the
procedure for a trial concerning the contravention of a civil penalty provision,
under common law principles, the Court retains the discretion in adapting the use
of civil procedures if they see fit, despite the fact that civil penalty proceedings
may typically resemble a ‘quasi-criminal’ trial.84
Others have described civil
penalty as an oxymoron, in that ‘it is really criminal. But this is to commit the
fallacy of the undistributed middle – to assume something is either criminal or
civil, with nothing in between’.85
In the United States, Mann has coined the phrase ‘middleground jurisprudence’ in
an attempt to describe the evolution of civil penalty as a ‘third arena of sanctioning
law…developed simultaneously with the criminal and civil paradigms.’86
This is
further suggestive that such jurisprudence has been embraced by the Courts in
response to justifying ‘the place of punitive civil sanctions in the constitutional
structure of American law’.87
If Australia follows in the footpaths of the United
States, then establishing the legal theory behind the use of civil penalty may also
fall upon the judiciary rather than the legislature or executive arm of our legal
system. Undeniably, it is often the insightful interpretation of the law plus the
historical analysis of the concept behind the law that reveal the philosophy behind
the intention of the provisions. Accordingly, much of the discourse in Australian
case law regarding the use of civil penalty has been focused on the subject of
whether this form of sanction is considered as a civil or criminal matter and
84
Sidebottom v Commissioner for Taxation (2003) 6 VR 302, 307 – Phillips JA citing Witham v
Holloway (1995) 183 CLR 525. 85
G Santow, ‘Corporations Law in a Federal System’ (Paper presented at Conference on the
Future of Corporation Regulation, Sydney, 3 November 2000). 86
Mann, above n 1,1813. Note that the term ‘punitive civil sanctions’ are used instead of civil
penalty in his paper. 87
Ibid.
25
whether procedural protections ought to apply if it presents with qualities of a
criminal or quasi-criminal facts.88
However, there appears to be a lack of
discussion as to whether civil penalty can be considered as a third branch of law,
emerging away from its previously recognised term of being just a form of hybrid
sanction.
4. Can civil penalty provisions be substantive in nature?
If one is to question the legitimacy of using civil penalty as a means to curb
corporate liability, it may be prudent to look at the theory behind the unique hybrid
qualities which civil penalty possesses. It should be recognised that a civil penalty
itself is there to determine the liability of a wrongful act and to provide an
assessment of a justified penalty for that act, therefore ‘it does not relate to the
nature of the wrongful conduct itself’.89
The significance of this is that a civil
penalty serves the purpose of enforcing some form of sanction against the
wrongdoer, but on its face, it does not seem to give or define people’s rights as a
form of substantive law, nor does it offer a ‘mode of proceeding by which a legal
right is enforced’90
as in procedural law. Hence it is difficult to envisage this
growing area of law as anything but a development in the regulation of corporate
conduct.91
88
Lees, above n 81, 420. 89
Richard Head, 'The Rise and Rise of Civil Penalties in Australia' (2008) 60(9) Keeping Good
Companies 518, 518. 90
Poyser v Minors (1881) LR 7 QBD 329, 333 per Lush J. 91
Welsh, above n 73, 13.
26
However, in terms of understanding and classifying what is substantive law,
Gibbs CJ together with Aickin, Wilson and Brennan JJ cited Salmond on
Jurisprudence in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc.92
Substantive law is concerned with the ends which the administration of
justice seeks; procedural law deals with the means and instruments by
which those ends are to be attained. The latter regulates the conduct
and relations of courts and litigants in respect of the litigation itself;
the former determines their conduct and relations in respect of the
matters litigated.93
Alternatively, as more simplistically expressed by Mason CJ in McKain v RW
Miller & Co (South Australia) Pty Ltd, 94
‘the essence of what is procedural may
be found in those rules which are directed to governing or regulating the mode or
conduct of court proceedings’, 95
and as Gleeson CJ, Gaudron, McHugh,
Gummow and Hayne JJ concluded in John Pfeiffer Pty Ltd v Rogerson, ‘all other
provisions or rules are to be classified as substantive’.96
Interestingly though, according to Salmond on Jurisprudence, another
distinguishing feature between substantive and procedural law is that when the
‘administration of justice is concerned with the application of remedies to violated
rights, the substantive law defines the remedy and the right, while the law of
procedure defines the modes and conditions of the applications of the one to the
92
(1981) 148 CLR 170, 176. 93
P.J. Fitzgerald, Salmond on Jurisprudence (Sweet & Maxwell, 10th ed, 1947) 476. 94
(1991) 174 CLR 1, 26-27. 95
Ibid, at 26-27. This view was also affirmed in John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR
503 96
(2000) 203 CLR 503, 543-544 [99].
27
other’.97
From this perspective, one could construe the enactment of civil penalty
provisions as a form of substantive law as it offers a remedy when personal rights
are violated as a result of corporate fault. It also serves the greater purpose of
administering justice by providing a statutory remedy for the complainant but at
the same time offering a form of punishment for corporate wrongdoers.
Furthermore, if one adopts the views of the judiciary then civil penalty provisions
ought to be classified as substantive law as they do not concern themselves with
the manners of court procedure. Thus it would appear to be erroneous to
categorise them as a form of procedural law. Even if one disagrees with the view
that civil penalty is more affiliated with substantive law than procedure law, such a
distinction, although largely drawn in theory, still has beneficial implications, as
many rules of procedure…are wholly or substantially equivalent to
rules of substantive law. In such cases the difference between these
two branches of law is one of form rather than of substance. A rule
belonging to one department may by a change of form pass over into
the other without materially affecting the practical issue.98
In Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd, 99
Kenneth
Martin J had cited Professor Dockray’s article to express that,
procedural law can be described as subordinate or adjectival because it
aims to give effect to substantive rules [it] should not conceal the truth
that procedures can and do interfere with important human rights,
97
P.J. Fitzgerald, Salmond on Jurisprudence (Sweet & Maxwell, 12 ed, 1966), 462-463. Another
example used to explain the difference between substantive and procedural law is that the question
of whether an offence is punishable by fine or by imprisonment would be considered as
substantive law because the existence and measure of criminal liability are matters pertaining to
the end and purpose of the administration of justice. But whether an offence is punishable
summarily or only on indictment is a question of procedure. 98
Ibid. 99
[2011] WASC 1 [80].
28
while the means by which a decision is reached may be just as
important as the decision which is made in the end. Where procedure
is as important as substance, procedural change requires the same
degree of political accountability and economic and social foresight as
reform of an equivalent rule of substantive law. Major innovations in
procedural law should therefore be recognised as an institutional
responsibility, not a matter on which individual judges should respond
to the pleas of particular litigants. Procedural revolutions should
appear first in statutes or in the Rules of Court, not in the law
reports.100
This passage highlights two important aspects of substantive versus procedural
law. Firstly, it draws attention to the fact that procedural law should not be
dismissed as something that is trivial especially since it has the potential to affect a
litigant’s right to pursue justice. Secondly, it is apparent that Dockray’s point of
view, adopted with approval by Kenneth Martin J, advocates for Parliament to
make appropriate procedural changes as opposed to relying on the inherent powers
of the Court. Although this opinion differs from that of Professor Mann’s
analysis,101
it may be the time and place for Australia to make an innovative
legislative change so that civil penalty can be proclaimed as a novel branch of law
with its own set of procedure. Instead of relying on the use of existing civil
procedure as a basis for trial, the enactment of a civil penalty procedure, that is
specifically tailored to suit the intention behind the enabling statute, will provide a
better protection against procedural hazards that have inadvertently occurred
during civil penalty proceedings in the past.
100
M.S Dockray, 'The Inherent Jurisdiction To Regulate Civil Proceedings' (1997) 113 Law
Quarterly Review 120,131. 101
Mann, above n 1,1813. See earlier discussion on the development of ‘middleground
jurisprudence’.
29
C. The growing need to establish a new civil penalty procedure
1. The pitfalls of using civil procedure in civil penalty proceedings – a lesson
learnt from the case of Rich v ASIC.
The main concerns surrounding the use of civil procedure for the contravention of
civil penalty provisions in the Corporations Act relate to applying the rules of
evidence. Granting that there are many types of procedural matters that may arise
during trial such as prosecutorial fairness, which have been raised in the recent
case of ASIC v Hellicar, 102
and the availability of the rule in Jones v Dunkel, 103
discussed in Adler v ASIC,104
it is beyond the scope of this paper to consider all of
the questions relating to the difficulties in applying civil procedure in civil penalty
proceedings. Instead, the focus will be on the issue of privilege and the standard
of proof, which have caused a lot of disparity for ASIC in trying to prove their
cases.
Perhaps the civil penalty case that stood out amongst the rest was the High Court’s
decision in Rich v ASIC, 105
which discussed the issue of privilege against
exposure to penalties with an undertone of whether civil penalties can be classified
as punitive or protective.106
This case presented an interesting argument in that it
demonstrated the uncertainties of applying procedural rules to civil penalties due
to their hybrid nature. The heart of the argument was that ASIC wanted the
appellants (Rich and Silbermann, who were directors of the collapsed company
102
(2012) 86 ALJR 522. 103
(1959) 101 CLR 298. 104
(2003) 179 FLR 1. 105
(2004) 220 CLR 129. 106
Ibid 141, [23] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.
30
One.Tel Ltd) to provide discovery of documents in support of the three types of
relief sought.107
These were:
a) a declaration under s 1317E of the Corporations Act 2001 (Cth)
(declaration of contravention);
b) orders pursuant to s 1317H(1) of the Act (the 2001 Act) that the
appellants pay One.Tel compensation (compensation orders); and
c) orders pursuant to ss 206C and 206E of the 2001 Act disqualifying
each appellant from managing a corporation for such period as the
Court considers appropriate (disqualification orders).108
Both the court of first instance and the New South Wales Court of Appeal
acknowledged that the proceedings against the appellant were civil in nature, so
the rules of evidence surrounding the privilege against penalties did not apply and
ordered the appellants to make discovery of documents.109
However, special leave
to the High Court was granted and by majority (Gleeson CJ, Gummow, McHugh,
Hayne, Callinan and Heydon JJ, with Kirby J dissenting) the High Court ruled in
favour of the appellants. It was concluded that the disqualification orders, ‘when
inflicted on account of a defendant’s wrongdoing, are penalties’,110
and so the
original orders for discovery on the basis that privilege against exposure of
penalties did not apply was discarded.
107
ASIC v Rich [2003] NSWSC 328 [2], Austin J - Since the events of the case occurred between
the years of 2000-2001, ASIC alleged that Rich and Silbermann had contravened s 180(1) of the
Corporations Law (NSW), and sought civil penalty orders under Part 9.4B against the appellants.
However, the NSW Supreme Court was able to hold the proceedings under the newly enacted
Commonwealth statute (Corporations Act 2001) due to the transition in July 2001, as the
provisions in Part 9.4B remained the same in both statutes. 108
Rich v ASIC (2004) 220 CLR 129, 135 [1]. 109
Ibid 130-131. 110
Ibid 147 [37].
31
The implications from this ruling meant that the High Court endorsed the fact that
‘the privilege against exposure to penalties is one of a trilogy of privileges that
bear some similarity with the privilege against incrimination, 111
something that is
already established in the criminal jurisdiction. In the Court of Appeal decision,
McColl JA (although in dissent) examined the history of penalty privilege and
reveals it to be a general privilege which developed in tandem with the
development of the privilege against self-incrimination…[as] can be
seen from R v Sorby (1983) 152 CLR 281 at 317-319, in which
Brennan J traced the historical development of the privilege against
self-incrimination through the abolition of the Court of Star Chamber
and the Court of High Commission in 1641 which had administered
the ex offıcio oath. …. The privilege was also extended not only to
protect accused at a criminal trial but also to protect persons obliged to
give discovery in proceedings to recover a penalty or in other civil
proceedings.112
Members of the High Court respectfully disagreed with the reasoning given by the
primary judge (Austin J) and the majority in the Court of Appeal (Spigelman CJ
and Ipp JA) on the premise that ‘a distinction between “punitive” and “protective”
proceedings was possible and useful and that, when applied to the present
proceedings, it led to the conclusion that the present proceedings have a protective
not punitive purpose’. 113
The rationale used to reject this proposition was that,
[f]irst, adopting such a classification diverts attention from the relevant
question which is whether the privilege against exposure to penalties
applies…
111
Ibid 141 [23]. 112
Rich v ASIC (2003) 183 FLR 361, 339 [195]. 113
Rich v ASIC (2004) 220 CLR 129, 144 [30].
32
Secondly, the supposed distinction between “punitive” and
“protective” proceedings or orders suffers the same difficulties as
attempting to classify all proceedings as either civil or
criminal…[which is at best] elusive…
Thirdly, not only does the supposed distinction between punitive and
protective procedures find no sure footing in the course of decision
concerning the application of the privilege against exposure to
penalties, it is inconsistent with the principles revealed by those
authorities.114
This passage underlines the difficulty in classifying whether civil penalties could
solely belong to the civil jurisdiction given that the penalty aspect of the provision
can resemble a punishment in criminal law. This element of criminality was
further emphasized in the judgement of McHugh J, where he stated that
[d]espite frequent statements by the judges who administer the
legislation that the purpose of the disqualification provisions is
protective, what the judges actually do in practice is little different
from what judges do in determining what orders or penalties should be
made for offences against the criminal law. Elements of retribution,
deterrence, reformation and mitigation as well as the objective of the
protection of the public inhere in the orders and periods of
disqualification made under the legislation.115
It is evident that McHugh J alludes to the fact that disqualification orders cannot
be purely protective given that the purpose of disqualifying a person from
managing a company can be seen as a form of retribution and deterrence, which
114
Ibid 144-145 [31] – [33]. The cited authorities include: Chief Executive Officer of Customs v
Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161; Rich v ASIC (2003) 183 FLR 361 and
Veen v The Queen [No2] (1988) 164 CLR 465. 115
Ibid 148 [41] – McHugh J.
33
also happens to be the main constituents of criminal law. By analogy, McHugh J
also compared the disqualification order to the suspension of a driver’s licence,
and suggested that both types of prohibition provided facets of punishment instead
of mere protection for the public.116
It appears then by classifying the civil penalty
disqualification order as punitive, the order itself has shifted from the perspective
of being in a civil regulatory environment towards a form of criminal sanction
whereby criminal procedural protections are allowed over the simple application
of civil procedural rules. In effect, this reinforces the argument that civil penalties
itself cannot be complacently placed in either categories of law, whether it be civil
or criminal, and using civil procedure in these proceedings have undoubtedly
caused ambiguity when applying the rules of evidence.
However, the dissenting judgement from Kirby J presented an interesting point of
view in relation to the characterisation of the disqualification orders as being either
punitive or protective in that he indicates that such a distinction may lead to
imposition of a ‘false dichotomy’.117
He claims,
[g]iven that the relevant part of the Act provides separately for
criminal and civil sanctions, it is erroneous to conflate the two or to
approach disqualification orders, classified by the Parliament as civil,
in the same way as if they imposed criminal sanctions…
The Act obliges consideration to be given to “conduct in relation to the
management, business or property of any corporation” … But it does
so not, as such, to measure any criminal punishment on the officer
concerned. It does so to judge the likely future conduct of the officer
if disqualification is refused. It protects the investing public,
shareholders and others by immobilising the proved contravener and
116
Ibid 149 [42]. 117
Ibid 165 [85].
34
depriving him or her, for the specified period, of the position of trust
and power that office in a corporation involves. Of course, the order
has a serious economic and reputational consequence for the officer
who is disqualified. But its purpose is not, as such, to impose criminal
punishment. If it were punitive, it would say so and it would have
been placed in a different part of the Act.
Admittedly, Kirby J points out that there are distinct criminal sanctions in the
Corporations Act and draws attention to Parliament’s intention behind the purpose
of establishing these civil penalty provisions as a deliberate form of regulatory
control under the ‘pyramid of enforcement containing a hierarchy of sanctions’.118
It is true that whilst the Act does not expressly state that civil penalties ought to be
thought of as a form of punishment, the fact that it entails disqualification orders
as well as compensatory orders suggest that it is there to provide more than simple
protection for the public. Even if these orders are a form of civil redress for the
harm caused by private individuals, the consequences of such orders mimic the
effect of criminal sanctions in that, not only are they there to produce a deterrent
and protective effect, these trials are also initiated by ASIC, a government
regulator, and thus a State representative. Notwithstanding that the State
regulatory watchdog does not sound as vicious as a State prosecutor, the crux of
this argument is that the proceedings are also there to serve a public interest, which
is correspondingly a fundamental principle under the criminal justice system. This
view is likewise reflected in the Court of Appeal’s decision by McColl JA, where
she states that,
118
Ibid 173 [111]. The model of pyramid of enforcement was introduced in the 1992 Corporations
Law reforms recommended by the Cooney Committee. See Australia, Parliament, Corporate Law
Reform Bill 1992: Draft Legislation and Explanatory Paper (1992), p50-51 [178].
35
[t]he statutory scheme of which s 206C forms part bears all the
hallmarks of a scheme intended to impose disqualification as a
punishment, or a consequence in the nature of punishment, albeit in a
civil framework. These features are sufficient to attract penalty
privilege. Although structured as a civil case both in terms of the
procedures to be applied (s 1317L) and the onus of proof (s 1332), the
proceedings are, in effect brought by the State and “accuse” the
defendant of a contravention of a public law - just as, in the criminal
context the defendant is accused of a breach of a statute. The civil
penalty scheme pivots around the declaration of contravention which
operates in the same sense as a finding of guilt and leads, in turn, to the
imposition of one or other of the available civil penalty orders. It is not
a suit which is purely of a civil nature.119
It is apparent from this reasoning that McColl J appreciates the fact that civil
penalty provisions exhibit more complexity than what meets the naked eye. It
seems that using existing civil procedure to try these cases can oversimplify and
misplace the importance of the penal properties of these contraventions.
Acknowledging that civil penalties sit in the middle of the pyramid of enforcement
regime, perhaps the use of this novel invention is there to give an illusion or false
comfort to those who commit corporate wrongs so that it is perceived as though
they are receiving a lesser penalty. If civil penalties are perceived and accepted as
a form of punishment, then it presents itself as a unique creature of the law
whereby its quasi-criminal penalties are tried in a civil jurisdiction instead of a
criminal court. This is acknowledge in Justice Kirby’s judgement, where he
accepts that sometimes there are difficulties when attempting to classify a statutory
proceeding as either civil or criminal even though he concludes that in the case of
119
Rich v ASIC (2003) 183 FLR 361, 434 [379].
36
penalty privilege in civil penalty hearings, the remedies provided is civil and not
criminal. 120
In addition, he discusses the use of the phrase ‘civil penalty’, and
submitted that, in his opinion, the emphasis should not be placed on the noun
(penalty) compared to the adjective (civil) when read within the context of the
Act.121
Consequently, this has led to an influx of academic discussion of whether
Parliament should provide clearer instructions and ‘expressly abrogate [such
procedural] protections if they are not to be available to defendants in such
hearings’.122
Following in line with the need to address this issue of privilege against penalties,
Parliament introduced the Corporations Amendment (Insolvency) Act 2007 which
expressly nullified the effect of the High Court’s decision in the Rich case. Hence
the privilege against exposure to a penalty for disqualifications orders under the
contravention of civil penalty provisions was abrogated by inserting a new
provision into the Corporations Act. Under this amendment, the Act now
stipulates that:
s1349(3) Statutory requirement A person is not entitled to refuse or
fail to comply with a requirement under this Act or the ASIC Act:
(a) to answer a question or give information; or
(b) to produce a book or any other thing; or
(c) to do any other act whatever;
120
Rich v ASIC (2004) 220 CLR 129, 168 [95] – [97]. 121
Ibid 169 [98]. 122
Rees, above n 3, 154-155. Other academics have also presented similar arguments in terms of
advocating for procedural protections with the introduction of new procedural rules for civil
penalty proceedings. See Lees, above n 81; Peta Spender, 'Negotiating the Third Way:
Developing Effective Process in Civil Penalty Litigation' (2008) 26 Company and Security Law
Journal 249.
37
on the ground that the answer or information, production of the book
or other thing, or doing that other act, as the case may be, might tend
to make the person liable to a penalty by way of:
(d) a disqualification under Part 2D.6 of this Act; or…123
The scope of this provision extends to both civil and criminal proceedings of a
court and any tribunal proceedings that arise out of the Corporations Act or the
ASIC Act. Although this amendment appears to have resolved this particular issue
of privilege, the fact remains, pursuing litigation under civil penalty provisions is
inherently awkward as it appears to be an artificially created medium to deal with
corporate misconduct.
In the final determination of the ASIC v Rich saga, Austin J handed down the
decision in 2009 indicating that ASIC has failed to prove its case due to a number
of reasons. 124
One cannot help but wonder if some of the reasons for its failure
were attributed to the inadequacies of using civil procedural rules for running a
case that consisted of civil penalty contraventions. In particular, Austin J observed
the polarity between criminal and civil proceedings with civil penalty
contraventions belonging to neither division. He noted that,
[t]he measure of similarity that civil penalty proceedings have to
criminal proceedings arises from the fact that civil penalty proceedings
are concerned with allegations of contravention of statute and the
protagonists are a Commonwealth agency and individual subjects of
the Crown. Successful prosecution of civil penalty proceedings leads
to a determination of contravention of a public law, and may lead to a
declaration of contravention which itself involves public opprobrium
123
Corporations Act 2001 (Cth) – This provision specifically relates to the Court power of
disqualification – contravention of civil penalty provision (s 206C). 124
ASIC v Rich (2009) 236 FLR 1.
38
and condemnation, and the imposition of a penalty by way of
pecuniary penalty or disqualification order. ASIC as plaintiff is acting
as an agency of the Commonwealth and not as a private litigant, and
like the prosecutor in criminal proceedings, is the guardian of the
public interest with a responsibility to ensure that justice is done.
There is the same kind of imbalance of power and resources that one
finds in criminal prosecution, and in particular, in the preparation of its
case, ASIC can take advantage of the very substantial investigatory
powers that it has under the ASIC Act, as well as in voting the search
warrant powers under the Crimes Act 1914 (Cth), and is right to
require assistance under s 1317R.125
These remarks go to the core of the predicament in surmising whether civil penalty
provisions can accurately be depicted as anything but a new branch of law, being
substantive in nature and thus deserving its own procedural rule to complement its
hybrid qualities.
125
Ibid 134 [533].
39
2. Is it appropriate to apply the civil standard of proof in civil penalty
contraventions?
It is well known that the standard of proof in a civil proceeding has always been
based on the balance of probabilities.126
This is established in common law and is
routinely used in Australia unless stated otherwise by the governing statute. For
example, the perception of the phrase itself, ‘on the balance of probability’, has
often been misguided by equating it to a mathematical quantity of greater than
50%. The problem with using this type of language to determine whether alleged
conduct did or did not occur is that it portrays a quantitative analysis as opposed to
a qualitative one. Ligertwood and Edmond have attempted to explain this process
of determination by suggesting that
[t]he fact-finder is confronted with conflicting hypothesis and must, on
the basis of experience of the ordinary course of events, determine
with which hypothesis or hypotheses all the evidence is consistent. If,
on this basis, there is evidence inconsistent with a particular
hypothesis, that hypothesis will be rejected altogether. If the evidence
is more consistent with one hypothesis rather than another, that former
hypothesis will be favoured. The more information consistent with a
particular hypothesis, the more probable that hypothesis becomes until
it reaches, by weight of evidence, a stage of acceptance by the fact-
finder as the likely explanation of all the available evidence. At this
stage, the hypothesis is described as proved on the balance of
probabilities. One might say that the fact-finder is persuaded or
believes that hypothesis probably occurred.127
126
Rejfek v McElroy (1965) 112 CLR 517. A fact is proved to be true on the balance of
probabilities if its existence is more probable than not, or if it is established by a preponderance of
probability. 127
Andrew Ligertwood and Gary Edmond, Australian Evidence A Principled Approach to the
Common Law and the Uniform Acts (LexisNexis Butterworths, 5th ed, 2010) 107.
40
This type of psychoanalysis of decision making was also explored by Mahoney JA
in Fabre v Arenales. 128
It is, in my opinion, important that the fact finding process not be over-
formalised or, a fortiori, ritualised. To do that would be to
misunderstand the nature of that process. There are, as I have
suggested, at least two aspects of any fact finding process: the
psychological process whereby the fact finder concludes that Z exists;
and the process or processes by which that conclusion is scrutinised or
tested, to determine whether, for the instant purpose, it should be
accepted and acted upon. The inference or conclusion that Z exists
may psychologically be arrived at in many ways. It may be arrived at
formally by inference or deduction according to the rules of logic.129
It appears then, in order for the court to be satisfied that a fact has been proven on
the balance of probabilities, that satisfaction must arrive by a ‘combination of both
mental and bodily sensations, and also possibly [by] the participation of emotion.
[This is consistent with] both mental and physical components of the decision-
making process.’130
This type of assessment in the decision-making process can
be used to rationalise the possible internal conflicts that a judge may experience
when presiding over civil penalty cases under the Corporations Act, especially
when the nature of the allegations by ASIC are already highly complex and
difficult to prove. Furthermore, since a Court must apply civil evidence and
procedural rules when presiding over the declarations of contravention of civil
penalties under the Act, 131
there has been widespread concern and dissatisfaction
128
(1992) 27 NSWLR 437. 129
Ibid 448-449. 130
Hayley Bennett and G A (Tony) Broe, 'The Civil Standard of Proof and the “Test” in
Briginshaw: Is there a Neurobiological Basis to Being “Comfortably Satisfied”?' (2012) 86
Australian Law Journal 258, 275. 131
Corporations Act 2001 (Cth) – s 1317L.
41
by the general public that the defendants have been given procedural protections,
such as the penalty against privilege which was explored in the Rich v ASIC case
discussed previously. This is analogous to those in criminal trials, despite it being
a civil case.132
These rules of evidence to which civil penalty proceedings are to
adhere by are found under s 140 of the Uniform Evidence Act 1995, which states:
(1) In a civil proceeding, the court must find the case of a party proved if
it is satisfied that the case has been proved on the balance of
probabilities.
(2) Without limiting the matters that the court may take into account in
deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence; and
(b) the nature of the subject-matter of the proceeding; and
(c) the gravity of the matters alleged.133
Notably, subsection (2) in the statute takes into account the principle established in
Briginshaw v Briginshaw,134
which is now commonly known as the Briginshaw
standard of ‘reasonable satisfaction’. This term is explained by leading judgement
of Dixon J in that,
[r]easonable satisfaction is not a state of mind that is attained or
established independently of the nature and consequence of the fact or
facts to be proved. The seriousness of an allegation made, the inherent
unlikelihood of an occurrence of a given description, or the gravity of
the consequences flowing from a particular finding are considerations
which must affect the answer to the question where the issue has been
proved to the reasonable satisfaction of the tribunal. In such matters
132
Refer to articles by: Lees, above n 81; Tom Middleton, 'The Difficulties of Applying Civil
Evidence and Procedure Rules in ASIC's Civil Penalty Proceedings under the Corporations Act'
(2003) 8 Company and Security Law Journal 507, 517; Rees, above n 3,117. 133
Evidence Act 1995 (Cth) – Chapter 4, Part 4.1 – Standard of proof. 134
(1938) 60 CLR 336.
42
“reasonable satisfaction” should not be produced by inexact proofs,
indefinite testimony, or indirect inferences.135
This reasoning was contemplated in the High Court decision of Neat Holdings Pty
Ltd v Karajan Holdings Pty Ltd, 136
a case that involved the allegation of deceit by
Neat Holdings against Karajan Holdings over the purchase of a family amusement
centre whereby the respondent had misrepresented the turnover of the business.
The relevance of this case is that it gave rise ‘on appeal to an issue as to the degree
of proof required of the appellant to make good that cause of action, which in turn
led the judgment being set aside’.137
It is interesting to note that Toohey J also
mentions the term ‘degree of proof’ rather than the ‘standard of proof’ given that
the majority of the High Court (Mason CJ, Brennan, Deane and Gaudron JJ) stated
that,
[t]he ordinary standard of proof required of a party who bears the onus
in civil litigation in this country is proof on the balance of
probabilities. That remains so even where the matter to be proved
involves criminal conduct or fraud…the strength of the evidence
necessary to establish a fact or facts on the balance of probabilities
may vary according to the nature of what it is sought to prove. Thus,
authoritative statements have often been made to the effect that clear
or cogent or strict proof is necessary “where so serious a matter as
fraud is to be found”. Statements to that effect should not, however,
be understood as directed to the standard of proof.138
The implication here appears to be that there is a noticeable difference between
degree and standard of proof, where the degree takes into account the magnitude
135
Ibid 362. 136
(1992) 110 ALR 449. 137
Ibid 454 – Toohey J. 138
Ibid 449.
43
and seriousness of the allegations as depicted under the Briginshaw standard,
while the standard of proof is always on the balance of probability for civil
proceedings. Similarly, in the Court of Appeal decision, Murray J (although in
dissent) discussed the ground of appeal in relation to the standard of proof and
concluded that the plaintiff’s submission was ‘merely an acceptance of onus [of
proof and that]… the degree of persuasion required will vary according to the
gravity of the fact at issue’.139
The High Court eventually reversed the decision from the Court of Appeal, as it
was held by majority that such ‘generalisations about the need for clear and cogent
evidence to prove matters of the gravity of fraud or crime are, even when
understood as not directed to the standard of proof, likely to be unhelpful and even
misleading.’140
This suggests that in cases which have elements of criminal
offences, despite being dressed up as a civil suit, the cogency of proof does not
necessarily assist in providing a reasonable satisfaction in persuading the court to
find an adverse judgment for the defendant. If one uses the imagery of loading up
the scale of justice with extra weight against the plaintiff who is trying to lumber
the defendant with a serious allegation, then the court will require a greater degree
of persuasion from the evidence before they can be convinced that the scales will
tip in favour of the plaintiff. In essence, the Briginshaw standard is represented by
the extra weight on the balance scale so that a higher degree of certainty is
required before the balance of probability can fall in favour or the plaintiff.
139
Karajan Holdings Pty Ltd v Neat Holdings Pty Ltd (Unreported, Supreme Court of Western
Australia, Court of Appeal, Seaman, Nicholson, Murray J, 19 December 1991) p11. 140
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 450.
44
A typical example of when the Briginshaw standard is used is when a civil case
bears resemblance to a criminal case or the allegations are so severe that it is
quasi-criminal in nature. If only circumstantial evidence is available at trial, then
having nine or ten circumstances which point together in the direction of an
adverse judgment for the defendant will be much more persuasive than having five
or six pieces of evidence against the defendant. In comparison to a criminal case,
in order to move the scale to the ultimate point where the court will hand down a
guilty verdict, there must be so many circumstances which point towards guilt that
their existence is simply incompatible with the innocence of the accused. This
type of reasoning was reflected in the case of ASIC v Healey,141
where Middleton J
made clear references to the use of the civil standard of proof involving
circumstantial evidence in a civil penalty trial. He explains,
…this is a civil and not a criminal case. We are concerned with
probabilities, not with possibilities. The difference between the
criminal standard of proof in its application to circumstantial evidence
and the civil is that in the former the facts must be such as to exclude
reasonable hypotheses consistent with innocence while the latter you
need only circumstances raising a more probable inference in favour of
what is alleged. In questions of this sort where direct proof is not
available it is enough if the circumstances appearing in evidence give
rise to a reasonable and definite inference: they must do more than
give rise to conflicting inferences of equal degrees of probability so
that the choice between them is mere matter of conjecture…But if
circumstances are proved in which it is reasonable to find a balance of
probabilities in favour of the conclusion sought then though the
conclusion may fall short of certainty, it is not to be regarded as a mere
conjecture or surmise.142
141
(2011) 278 ALR 618; (2011) 83 ACSR 484. 142
Ibid 507-509.
45
Therefore, at this stage, in relation to civil penalty proceedings, the Briginshaw
standard appears to be an appropriate vehicle in allowing the court the flexibility
to place greater emphasis on the penalty aspect of the proceeding, so that it reflects
on the severity of the allegations, such as when pecuniary penalties or
disqualification orders are sought by ASIC. But a downside to using the
Briginshaw standard of approach is that if the allegations of the civil penalties are
so severe that it mimics the features of a criminal offence. For example, when the
interest of the state and the community are being affected more so than the private
individual, or when the breach of directors duties are purported to stem from a set
of fraudulent conducts. Then the court may require a much stricter standard of
proof in order to tip the balance of the scale in favour of the plaintiff, even if it is
still below the criminal standard.143
Ultimately though, it must be emphasized that the Briginshaw standard does not
override the existing civil standard of proof which is still on the preponderance of
probability and it is not to be held as a third standard of proof since there has been
no such development in Australia’s common law history.144
Hence, it is not
meant to be reckoned as ‘an intermediate between the criminal and the civil
standard’.145
Nevertheless, it is interesting to note that in the case of Witham v
Holloway,146
which was concerned with a contempt of court matter, McHugh J
discusses the concept of ‘clear and convincing’ proof which is accepted in the
United States as a third standard of proof, but concludes that it not the same as the
Briginshaw standard in Australia.
143
Middleton, above n 132, 518. 144
Briginshaw v Briginshaw (1938) 60 CLR 336, 361 and 363 – Dixon J. 145
C R Williams, 'Burdens and Standards in Civil Litigation' (2003) 25(2) Sydney Law Review
165, 175. 146
(1995) 183 CLR 525.
46
In the United States, the standard of proof is determined by the nature
of the proceedings. In criminal contempt, proof must be established
beyond reasonable doubt [citation omitted]. In civil contempt, proof
must be "clear and convincing" which is a standard that lies between
the ordinary civil and criminal standards. The standard of proof in civil
contempt appears to derive from Oriel v Russell [citation omitted], a
case relating to the enforcement of an order for production of certain
business records in a bankruptcy case.
…It is difficult to determine whether the "clear and convincing proof"
standard formulated in Oriel is the United States equivalent of proof in
accordance with Briginshaw v Briginshaw. However, since it is a
standard that lies between the ordinary civil standard and the criminal
standard of proof, it would appear most unlikely that it is.
That being so, it would be undesirable to adopt the United States test
for civil contempt and introduce a third standard of proof into
Australian jurisprudence.147
The judgment of McHugh J indicates that the Briginshaw standard is not an
alternate standard of proof, but it might be premature to completely abandon the
idea of introducing a third standard of proof especially for civil penalty litigations
in the future. This is because if civil penalties are to be embraced as a separate
entity of law which is comprised of an amalgamation of civil and criminal law,
then it should not rely on the same parameters used in a civil procedure to govern
the framework of its trials. Undoubtedly, establishing a third standard of proof
from common law jurisprudence is perhaps an unrealistic expectation due to the
intrinsic difficulties in quantifying such a new standard, but it may be plausible for
Parliament to intervene by descriptively providing a different set of conditions for
147
Ibid 546-547.
47
an acceptable standard of proof in civil penalty proceedings, if a civil penalty
procedure is to be developed in the future.
3. Proposed models of a civil penalty procedure
Idealistically, if Parliament introduces a civil penalty procedural rule that is
specifically designed for proceedings of contraventions of civil penalty provisions
in the Corporations Act, then it should alleviate some of the variable aspects
procedural conflicts observed in ASIC cases as discussed previously. It may also
bring the proceedings more in line with the intention behind the strategic
regulation theory, so that civil penalties are truly seen as a middle-ground sanction
which sits in between criminal punishment and civil compensation. It may also
enforce the view that civil penalties ought to be recognised as a branch of
substantive law rather than a form of regulatory law due to its unique hybrid
qualities, which prevents it from being classified into either of the existing
categories of law. I now present some of the discourse pertaining to proposals for
an alternate procedure for civil penalty proceedings.
According to Middleton, a uniform civil code should be enacted which aims to
provide ‘greater uniformity in relation to the applicable rules of evidence and civil
procedure’.148
The goal of passing such a code is that it would eliminate the
uncertainties associated with any evidential immunities, such as the variable civil
standard of proof; prosecutorial fairness; penalty privilege and privilege against
self-incrimination and cross examination during civil penalty trials.149
Although
148
Middleton, above n 132, 528. 149
Although certain issues have already been settled when Parliament introduced amendments into
the Corporations Act, such as the abrogation of privilege against penalties under s 1349.
48
Middleton does not share the enthusiasm of developing a complete set of rules for
civil penalty proceedings, due to the danger that ‘it may produce unintended
effects on judicial behaviour in the sense that the hybrid principles may
subsequently influence the courts in enlarging the scope of the criminal law
beyond its traditional boundaries’.150
He nevertheless does point out the pragmatic
problems that may occur if a new civil penalty procedural rule is formulated. He
claims that they will ‘add an extra layer of complexity to ASIC’s proceedings and
may discourage ASIC from commencing civil penalty proceedings’.151
Undeniably, this is an accurate reflection of the dilemma one faces, especially
since most ASIC trials that involve a declaration of a contravention of civil penalty
provisions are already quite complicated and drawn out to start with. However,
the ‘uniform code’ model fails to address the root of the problem which is that
civil penalties possess qualities that are not completely civil in nature. Thus if a
separate procedure can be drafted to precisely avoid the ambiguities that caused
the setback in previous cases, then it may provide a superior solution than having a
uniform code that only removes the inconsistencies between current civil
procedural rules and the rules of evidence.
A different approach discussed by Rees in her campaign for a more appropriate
procedure for civil penalty proceedings is to propose a
hybrid set of rules that acknowledge on the one hand that civil
proceedings do not result in a criminal conviction so preserving that
important distinction, but which recognise on the other that civil
penalties may be punitive especially where the monetary exaction is
150
Middleton, above n 132. Middleton acknowledging the views of John Coffee Jnr in his article,
see Coffee, above n 44. 151
Middleton, above n 132, 528.
49
large or there is a loss of office consequent on a finding of wrong-
doing.152
Rees’ analytical research of the current problems associated with using civil
procedure in civil penalty trials presented a valuable insight into the difficulties of
balancing the hybrid qualities of this statutory remedy in a modern day context of
the acceptance of a criminal-civil divide. In particular, the issues surrounding the
privilege against exposure to a penalty, the standard of variable proof and
prosecutorial fairness were discussed to extend the view that if ‘civil evidence and
procedure is being developed on a case-by-case basis [for] civil penalty
proceedings, [then] the courts have considerable capacity to tailor proceedings to
meet the justice of a case’. 153
However such a flexible approach has led to
various uncertainties and Rees has put forward the same view as the ALRC, which
recommended a ‘Regulatory Contravention Statute [that would] bring about a
uniform approach’154
to all civil penalty proceedings. This type of proposal
appears to take into account the source of the conundrum which is that civil
penalties have both civil and criminal aspects of a remedial action and thus using
existing civil procedures to oversee the proceedings will run into the expected, but
obvious, difficulties like procedural fairness and the variable standard of proof.
Therefore, it seems to be a good starting point in advocating for a civil penalty
procedural rule for the benefit of simplifying some of the existing Australian law
that contains civil penalty provisions so that future litigation on such matters may
be resolved with fewer procedural difficulties.
152
Rees, above n 3, 117, 155. 153
Ibid 154-155. 154
Ibid 155. Rees citing ALRC recommendation from the article Principled Regulation: Federal
Civil & Administrative Penalties in Australia – see (ALRC), above n 2, 263 [6.204].
50
Perhaps the most radical suggestion in law reform for civil penalty proceedings
was suggested by Spender, who took on the same view as Rosen-Zvi and Fisher,155
in that
the current bifurcated civil-criminal regime should be replaced with a
procedural model that is more compatible with the actual goals of our
justice system where procedures are developed along two parallel
axes, namely, the balance of power between the parties and the
severity of the sanction or remedy.156
Spender argues that ‘judicial determinations about civil penalty procedure
frequently resort to criminal models’157
which creates an imbalance of power for
the defendant in terms of a lack of resources that is attainable by them compared to
ASIC’s wide range of powers, and hence a reflection of ‘unequal adversaries’158
.
Furthermore, the situation is examined to reveal that
[t]he civil-criminal dichotomy is a proxy for the balance of power
between respective parties. Therefore the enhanced protections of
criminal procedure are intended to redress the imbalance of power in
favour of the prosecution which has greater access to resources,
enhanced information gathering powers and sophisticated investigative
and prosecutorial apparatuses. However, in the civil sphere there is an
assumption of structural equality and power between the parties which
results in a neutrality of safeguards, eg by requiring the same
disclosure by both parties.159
155
Rosen-Zvi and Fisher, above n 44. 156
Spender, above n 122, 257. 157
Ibid 258. 158
Ibid 257. 159
Ibid.
51
Although this evaluation may have a theoretical basis of justification, it, however,
lacks the empirical data to support such a claim. According to Welsh, ASIC’s
choice of enforcement for a breach of the directors’ duty provisions are leaning
more towards the use criminal sanctions as opposed to civil penalties,160
even
though these breaches can attract both types of punishment. This conveys the
image that ASIC’s use of civil penalties in regulating corporate wrongs are not as
‘fearful’ as a proceeding issued by the Commonwealth Director of Public
Prosecution (CDPP) in seeking a criminal sanction against the defendant. This
imagery, coupled with the fact that ASIC’s trials for recent civil penalty
contraventions have not had a convincing success rate, prompts the question of
whether the imbalance of power does play a significant role in the proceedings.
In addition, Spender does not specify what the new model for civil penalty
proceedings ought to be like, for example, how does the imbalance of power
become resolved? Does the defendant receive more leeway when being pursued
by ASIC under the contravention of civil penalty provisions based on the
presumption that they are a lesser adversary? What threshold would be set in
order to objectively view the defendant as a lesser opponent compared to ASIC?
Would the size of a corporation be a determinative factor because a ‘large’
corporation is supposedly assumed to be more resourceful than a ‘small’
corporation? These questions raise the concern that such a model can only be
viable if there are strict guidelines in defining the parameters used to assess the
imbalance of power.
160
Michelle Welsh, 'The Regulatory Dilemma: The Choice Between Overlapping Criminal
Sanctions and Civil Penalties for Contraventions of the Directors' Duty Provisions' (2009) 27
Company and Security Law Journal 370, 383-384.
52
These three Australian models each present an intriguing view of promoting the
need to have an alternative procedure for civil penalty proceedings under the
Corporations Act. Of the three models presented, Rees’ concept appears to be
most logical next step forward in the search for a statutory intervention to reduce
the erratic effects of court procedure, given that it is also in congruence with the
ALRC’s recommendation of a Regulatory Contravention Statute.161
It should also
be emphasized that the reason behind such a push for law reform is likely to be
due to the current inadequacies of resolving legal disputes using existing civil
procedure to preside over civil penalty contraventions. Because there is still a
constant struggle in classifying civil penalties under the existing dichotomy of
criminal and civil law, the continuous evolution of civil penalties may eventually
overcome this type of dialogue if it becomes formally recognised as substantive
law in the future. Although it is beyond the scope of this paper to devise a new
model for a civil penalty procedure, the discourse surrounding the literature
justifies the need for parliament to intervene in this area of law, and further
exploration in light of this debate may be warranted.
This concludes Part I of the thesis which leads to Part II of the thesis where the
issue of constitutional challenge to the provisions in the Corporations Act will be
explored on the basis of infringing Chapter III of the Constitution. Although there
is limited case law which examines the constitutional validity of the current civil
161
(ALRC), above n 2, 262-263. Recommendation 6-7. A Regulatory Contraventions Statue of
general application should be enacted to cover various aspects of the law and procedure governing
non-criminal contraventions of federal law in accordance with the Recommendations in this
Report. Recommendation 6-8. The Regulatory Contravention Statue is not intended to be a
comprehensive code but rather should be express: (a) to contain certain principles of
responsibility that apply to any non-criminal breach of any law of the Commonwealth; (b) to
prevail over any inconsistent Commonwealth law to the extent of that inconsistency unless that
other law expressly excludes or modifies the operation of the Regulatory Contraventions Statute
by express reference to that statute (or the portion of it, the operation of which is to be excluded).
53
penalties provisions of the Corporations Act, an attempt is made to try and predict
the effect of future constitutional challenges to these provisions if a mandatory
imposition of penalties were introduced into the legislation.
III. PART II – EXPLORING THE CONSTITUTIONAL VALIDITY OF THE
CORPORATIONS ACT
A. Defining constitutional invalidity
1. Infringing Chapter III of the Constitution
Under constitutional theory, the doctrine of separation of powers enables the
executive, legislative and judicial bodies to remain as distinct governing bodies,
each pertaining to have their own legal power to perform its accepted function.162
Focusing on the aspect of judicial independence, Wheeler has suggested that ‘the
High Court is now taking a stricter approach to the separation of powers than 20 or
30 years ago’.163
This is stated in the context of having reviewed the development
of Chapter III jurisprudence from cases like Polyukhovic v Commonwealth,164
Chu
Kheng Lim v Minister for Immigration,165
Wilson v Minister for Aboriginal and
Torres Strait Islander Affairs166
and Kable v Director of Public Prosecution
(NSW),167
which all centred on the issue of legislative intervention and the
usurpation of judicial power. In particular, Brennan, Deane and Dawson JJ
expressed a compelling view that
162
The Wheat Case (1915) 20 CLR 54. Issac J clearly describes the principle of the separation of
powers that separates the functions of each governing body, as laid out under Chapter I, II and III
of the Constitution, see p88-90 of the judgment. 163
Fiona Wheeler, 'The Rise and Rise of Judicial Power under Chapter III of the Constitution'
(2001) 20(3) Australian Bar Review 283, 285. 164
(1991) 172 CLR 501. 165
(1992) 174 CLR 455. 166
(1996) 189 CLR 1. 167
(1996) 189 CLR 51.
54
[o]urs is a Constitution "which deals with the demarcation of powers,
leaves to the courts of law the question of whether there has been any
excess of power, and requires them to pronounce as void any act which
is ultra vires"... All the powers conferred upon the Parliament by s 51
of the Constitution are, as has been said, subject to Ch. Ill's vesting of
that judicial power in the courts which it designates, including this
Court. That judicial power includes the jurisdiction which the
Constitution directly vests in this Court in all matters in which the
Commonwealth or a person being sued on behalf of the
Commonwealth is a party… or in which mandamus, prohibition or an
injunction is sought against an officer of the Commonwealth (s 75(v)).
A law of the Parliament which purports to direct, in unqualified terms,
that no court, including this Court, shall order the release from custody
of a person whom the Executive of the Commonwealth has imprisoned
purports to derogate from that direct vesting of judicial power and to
remove ultra vires acts of the Executive from the control of this Court.
Such a law manifestly exceeds the legislative powers of the
Commonwealth and is invalid. Moreover, even to the extent that s 54R
[of the Migration Act 1958 (Cth)] is concerned with the exercise of
jurisdiction other than this Court's directly vested constitutional
jurisdiction, it is inconsistent with Ch. III.
In terms, s 54R is a direction by the Parliament to the courts as to the
manner in which they are to exercise their jurisdiction. It is one thing
for the Parliament, within the limits of the legislative power conferred
upon it by the Constitution, to grant or withhold jurisdiction. It is a
quite different thing for the Parliament to purport to direct the courts as
to the manner and outcome of the exercise of their jurisdiction. The
former falls within the legislative power which the Constitution,
including Ch. III itself, entrusts to the Parliament. The latter constitutes
an impermissible intrusion into the judicial power which Ch. III vests
exclusively in the courts which it designates.168
168
Chu Kheng Lim v Minister of Immigration (1992) 176 CLR 1, 36-37 (emphasis added ). s 54R
provided that ‘a court is not to order the release from custody of a designated person’.
55
This passage distinctly identifies the framework of the Constitution in that
emphasis is placed on the illegitimate interference by Parliament to seize some of
the powers of the judiciary. Moreover, it reflects the view that provisions of any
legislation which attempts to convert the court into an instrument of the state, by
dictating what it should do or not do, will be held as constitutionally invalid. The
logical consequence will be that if a person mounts a constitutional challenge to
such a provision, the court is likely to have it struck down based on the
infringement against Chapter III of the Constitution.
2. The rise and fall and possible revival of the Kable principle
The doctrine of separation of power was also accepted to be a federal doctrine and
only plays a limited role in State Courts as indicated in the decision of Kable v
Director of Public Prosecution (NSW).169
However, McHugh J did point out that
…although New South Wales has no entrenched doctrine of the
separation of powers and although the Commonwealth doctrine of
separation of powers cannot apply to the State, in some situations the
effect of Ch III of the Constitution may lead to the same result as if the
State had an enforceable doctrine of separation of powers. This is
because it is a necessary implication of the Constitution's plan of an
Australian judicial system with State courts invested with federal
jurisdiction that no government can act in a way that might undermine
public confidence in the impartial administration of the judicial
functions of State courts. If it could, it would inevitably result in a lack
169
(1996) 189 CLR 51, 109. This case involved the enactment of the Community Protection Act
1994 (NSW) which was challenged by Kable to be constitutionally invalid as it empowered the
Supreme Court to make an order for the detention of a specified person in prison for a specified
period if it was satisfied that the person was more likely than not to commit a serious act of
violence for the protection of a particular person or the community generally. The provisions (s
5(1)) was held to be invalid by majority (Toohey, Gaudron, McHugh and Gummow JJ with
Brennan CJ and Dawson J dissenting) as it was incompatible with Ch III of the Commonwealth
Constitution and affected the integrity, independence and impartiality of the Supreme Court as a
court in which federal jurisdiction which had been invested under Ch III.
56
of public confidence in the administration of invested federal
jurisdiction in those courts. State governments therefore do not have
unrestricted power to legislate for State courts or judges. A State may
invest a State court with non-judicial functions and its judges with
duties that, in the federal sphere, would be incompatible with the
holding of judicial office. But under the Constitution the boundary of
State legislative power is crossed when the vesting of those functions
or duties might lead ordinary reasonable members of the public to
conclude that the State court as an institution was not free of
government influence in administering the judicial functions invested
in the court.170
The significance of this dictum clearly suggests that by relying on the doctrine of
incompatibility rather than the separation of powers, the State parliament is still
adequately restrained from interfering with the judiciary. Hence the State courts
remain independent and impartial and public confidence is undisturbed. In effect,
this proposition of incompatibility between exercising non-judicial and judicial
functions of the State court became the heart of the Kable principle. According to
Associate Professor Carney, ‘the Court must be protected in the exercise of both
its state and federal jurisdiction given that any impairment of its independence and
integrity in the exercise of either jurisdiction will impact on the other. Viewed in
this light, the independence and integrity of a court is indivisible.’ 171
In addition, Gaudron J described the invalid provisions of the Act in Kable as an
‘antithesis of the judicial process’.172
Her Honour perceived that s 5(1) of the Act
would ultimately undermine public confidence of the Court and their criminal
170
Ibid 118-119. 171
Gerard Carney, 'Wilson & Kable: The Doctrine of Incompatibility - An Alternative to
Separation of Powers?' (1997) 13 Queensland University of Technology 175, 191-192. 172
Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51, 106.
57
processes especially when, ‘the courts are required to deprive persons of their
liberty, not on the basis that they have breached any law, but on the basis that an
opinion is formed, by reference to material which may or may not be admissible in
legal proceedings, that on the balance of probabilities, they may do so’.173
This is
because the provisions took on the peculiar nature of having the power to instruct
the Court in finding a person guilty based on the likelihood of whether the person
would commit an offence of violence in future during a civil proceeding. It is as
though the Act is dressing up the proceedings to be like a criminal trial, even
though the criminal rules of evidence do not apply. Yet the Act allows a person to
be deprived of their liberty if an opinion is formed to suggest that he/she is likely
to commit a serious act of violence.174
The implications arising from this is that
the Act appears to exert a quasi-criminal status in that it has the power to order the
finding of criminal guilt of a person without the need for trial by jury. This is
because s 14 claims that proceedings are held under the civil jurisdiction with the
balance of probabilities as the standard of proof (s 15). In some ways, this law
resembles the hybrid qualities of civil penalties as it attempts to capture the
punishment aspects of criminal law whilst using civil procedures as a basis for
trial.175
Nevertheless, the Kable principle offered an unsettling precedent in that it had
limited applications in subsequent case law and is even described by Kirby J to be
a ‘constitutional guard dog that barks but once’.176
In the case of Fardon v
173
Ibid 107. 174
Ibid. 175
This line of thought is further discussed by Weinberg JA in ASIC v Ingleby [2013] VSCA 49
and will be examined in section III of this part of the thesis. 176
Baker v The Queen (2004) 223 CLR 513, 535.
58
Attorney-General (Qld),177
the majority of the High Court (Gleeson CJ, McHugh,
Gummow, Hayne, Callinan and Heydon JJ with Kirby J dissenting) decided that
the Dangerous Prisoners (Sexual Offenders) Act 2003 (Qld) was valid ‘as it did
not impair the institutional integrity of the Supreme Court of Queensland in such a
fashion as to be incompatible with the Court’s constitutional position as potential
repository of federal judicial power’.178
This judgment provided a contrasting
outcome to Kable in that the Queensland Act allowed judicial discretion in making
different kinds of orders 179
and it had a broader application of the protection order
for the community against dangerous sex offenders. Therefore the Queensland
Act did not have an ad hominem operation like the New South Wales Act in Kable
where the legislation specifically targeted Mr Kable alone.
Yet the appellants in Fardon attempted to use the Kable principle to mount a
constitutional challenge to the Queensland Act by suggesting that
[t]he determination of criminal guilt by the judiciary cannot, in a
manner consistent with Ch III, be diluted by legislation purporting to
authorise a Ch III court to imprison a person under the guise of civil
commitment. It is also inconsistent with Ch III to order imprisonment
without any fresh crime, trial and finding of criminal guilt. This breaks
the nexus between crime and punishment which is part of the
fundamental logic of the system of law... The rule of law does not
permit punishment in advance. Judicial power is characterised by the
application of the law to past events or conduct ... Sections 8 and 13
177
(2004) 223 CLR 575. This case involved a constitutional challenge to the validity of ss 5, 8 and
13 of the Dangerous Prisoners (Sexual Offenders) Act 2003 (Qld) on the basis that it offended
Chapter III of the Constitution by applying the Kable principle. 178
Ibid 575. 179
Ibid. See Gleeson CJ 57 [19]-[20]; McHugh J 60-62 [34], Gummow J 78-79 [100]-[104].
59
imprison for something which might be done in the future. The
prediction is unreliable.180
This argument was rejected by Gleeson CJ. He reasoned that
[i[t might be thought that, by conferring the powers in question on the
Supreme Court of Queensland, the Queensland Parliament was
attempting to ensure that the powers would be exercised
independently, impartially, and judicially. Unless it can be said that
there is something inherent in the making of an order for preventive, as
distinct from punitive, detention that compromises the institutional
integrity of a court, then it is hard to see the foundation for the
appellant’s argument.…the existence of legislation of that kind makes
it difficult to maintain a strict division between punitive and preventive
detention’181
Both Callinan and Heydon JJ also expressed that the Queensland Act in Fardon is
a ‘protective law authorising involuntary detention in the interest of public safety.
Its proper characterisation is as a protective rather than a punitive enactment’.182
This line of thought from the High Court poses an interesting rationale for
justifying imprisonment terms in a piece of legislation that is primarily civil in
nature183
but claims to have protective and preventative functions. It also provided
an alternate view to the traditional opinion that imprisonment of an individual is
deemed to be punitive and can only be ordered by a court after a criminal trial.184
Although the High Court recognises that there are exceptions to civil commitments
180
Ibid 577. S R Southwood QC with P D Keyzer for the Appellant. 181
Ibid 592 [20]. 182
Ibid 654 [217] – Callinan and Heydon JJ. 183
Ibid 636 [162] – Kirby J. The Dangerous Prisoners (Sexual Offenders) Act 2003 (Qld) allows
the Supreme Court of Queensland to order the indefinite detention of a person under civil
commitment, without a fair trial or a finding of guilt in a criminal matter. 184
Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161,
178-179.
60
for imprisonment,185
Kirby J emphasizes in his dissenting judgment that this Act
‘hardly makes any effort to pretend to a new form of “civil commitment” [and] it
fails to disguise its true character, namely punishment.’186
He contends that
by Australian constitutional law, punishment as such is reserved to the
judiciary for breaches of the law. An order of imprisonment as
punishment can therefore only be made by a court following proof of
the commission of a criminal offence, established beyond reasonable
doubt … where the charge is contested,… in a fair trial at which the
accused is found guilty by an independent court of the offence
charged. Here there has been no offence; no charge; no trial.
Effectively, the presumption of innocence has been removed ...
Instead, because of a prisoner’s antecedents and criminal history,
provision is made for a new form of additional punishment utilising
the courts and the corrective services system in a way that stands
outside the judicial process hitherto observed in Australia. Civil
commitment to prison of persons who have not been convicted of a
crime is inconsistent with, and repugnant to, the exercise of the judicial
power as envisaged by the Constitution...187
As a result, the Fardon judgment was highly criticised by various academics to
have abandoned the Kable principle as it violated the institutional integrity of the
courts by ‘undermining the logic of the criminal justice system’.188
It appears to
endorse the fact that imprisonment can be non-punitive if Parliament says so, and
that involuntary detention of a person can be based on the commission of a prior
offence without the need for actual determination of criminal conduct.189
This
185
Fardon v Attorney-Generald (Qld) (2004) 223 CLR 575, 634 [155]. 186
Ibid 636 [162]. 187
Ibid. 188
Patrick Keyzer, 'Preserving Due Processes or Warehousing the Undesirables: To What End the
Separation of Judicial Power of the Commonwealth' (2008) 30 Sydney Law Review 100,111. 189
Peter Johnston, 'State Courts and Chapter III of the Commonwealth Constitution: Is Kable's
Case Still Relevant' (2004) 32 University of Western Australia Law Review 211,220.
61
presents yet another example of the blurring between the criminal and civil
positions of law. It is as though the punishment aspects of the criminal law have
been “borrowed” by the civil jurisdiction in order to exert a retributive effect. This
could lead to a dangerous misconception of identifying the true nature of
punishment, which ought to rest in the criminal justice system. According to
Fitzgerald, ‘the notion of punishment entails the actual or supposed commission of
an offence. This is one side of the retributive nature of punishment: punishment in
the abstract is meaningless; punishment can only be inflicted for an offence’. 190
If
punishments are to emerge in civil legislation without the basis of an offence then
it may lose the meaning and value of its penalty, not to mention that it could be
subjected to a constitutional challenge as being inconsistent to the exercise of
judicial power under Chapter III of the Constitution.
More recently, the High Court has further developed the jurisprudence on the
constitutional invalidity of legislation that contained provisions which have a
mandatory imposition of orders and penalties. It is seen as a revitalisation of the
Kable principle. This principle was reiterated and applied in the case of South
Australia v Totani,191
where it was decided by the majority of the High Court
(French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ with Heydon J
dissenting) that s 14(1) of the Serious and Organised Crime (Control) Act 2008
(SA) (or the SOOC Act) was invalid. In applying the Kable doctrine, Hayne J
held that the SOCC Act is repugnant to the institutional integrity of the courts
190
Patrick John Fitzgerald, Criminal Law and Punishment (Clarendon Press, 1962), 199. 191
(2010) 242 CLR 1. This case involved a constitutional challenge to the Serious and Organised
Crime (Control) Act 2008 (SA) which had the objective to (a) to disrupt and restrict the activities
of (i) organisations involved in serious crime, and (ii) the members and associates of such
organisations; and (b) to protect members of the public from violence associated with such
criminal organisations. This case applied the Kable doctrine and distinguished the principles
applied in Fardon v Attorney-General (Qld)(2004) 223 CLR 575.
62
because it gave the Executive the power to order the Magistrates Court in making
a control order against a person. This is done ‘without inquiring how, if at all, that
order will contribute to the legislative object of disrupting the criminal activities of
identified groups, or the criminal activities of any individual. The obligations
which are created by the Court’s order are not imposed on account of what the
person against whom the order is directed has done, will do, or may do.’192
In
effect, ‘the Court cannot refuse the Executive’s application… [and] is acting at the
behest of the Executive.’193
In agreement with the majority of the High Court, French CJ explained the
constitutional invalidity of the SOCC Act in terms of the infringement against
Chapter III of the Constitution. He stated that
[t]he SOCC Act thereby requires the Magistrates Court to carry out a
function which is inconsistent with fundamental assumptions, upon
which Ch III of the Constitution is based, about the rule of law and the
independence of courts and judges. In that sense it distorts that
institutional integrity which is guaranteed for all State courts by Ch III
of the Constitution so that they may take their place in the integrated
national judicial system of which they are part.194
It is worthwhile to note that French CJ uses the ideology from the ‘rule of law’ to
accentuate and rationalise the importance of maintaining the independent status of
courts and judges so that the institutional integrity can be assured by the implied
rights under Chapter III of the Constitution.195
This is because the impartiality and
192
Ibid 89 [228]. 193
Ibid 89-90 [229]. 194
Ibid 21 [4]. 195
Ibid 49 [73] – French CJ made further references to the rule of law, to which the Constitution
was based on, and highlighted the fact that its application does not discriminate any individual or
63
independence of a court remain as a central element of the rule of law whereby
‘the idea rests upon the reasonable understanding that whenever the power of the
state becomes too highly concentrated in the hands of an individual or political
agency, the risk of arbitrariness subsequently increases. A truly independent
judiciary may, therefore, compel public authorities to respect the proper limits of
legality.’196
In addition, this stance affirms the doctrine of the separation of
powers which aims to deliberately prevent the accumulation and concentration of
power in any single institution so that a form of competitive interdependence is set
up within the government.197
Given the continual development on the jurisprudence surrounding the Kable
principle, McCunn argues that the scope of this principle remains uncertain due to
the ‘multiple formulations of standards that have been adopted when parties have
sought to invoke the principle’.198
He describes the standards to be (i) procedural
fairness; (ii) the judicial process and (iii) the institutional integrity of the relevant
court,199
and concludes that ‘repugnance to the judicial process should be adopted
as the sole standard for determining the validity of legislation according to Kable
principle’.200
Although McCunn derives the basis of his analysis from doctrinal
research which focused on the case of Totani and International Finance Trust Co v
NSWs Crime Commission,201
it may be prudent to draw a wider application of the
Kable principle under the separation of judicial power and its impact on State
group ‘according to the measure of public or official condemnation, however justified, of that
individual or that group.’ 196
Augusto Zimmermann, 'The Rule of Law as a Culture of Legality: Legal and Extra-Legal
Elements for the Realization of the Rule of Law in Society.' (2007) 14 eLaw Journal 10,21. 197
Ibid, citing Brian Z Tamanaha, On the Rule of Law: History, Politics, Theory (Cambridge
University Press, 2004),35. 198
Ayowande A McCunn, 'The Search for a Single Standard for the Kable Principle' (2012) 19
Australian Journal of Administrative Law 93,110. 199
Ibid 100. 200
Ibid 110. 201
(2009) 240 CLR 319.
64
courts. According to Associate Professor Stellios, there are jurisdictional issues to
which the Commonwealth Parliament may have the power to control the law that
is applied in a State court which is exercising federal jurisdiction.202
He suggests
that constraints are placed on the Commonwealth Parliament
when prescribing the kinds of powers and functions that might be
conferred on a court. They can operate to frustrate experimentation
and innovation with judicial functions when they do not comfortably
fit the classic paradigm of judicial power. Furthermore, despite the
absence of a separation of powers at the State level, these federal
limitations limit the choices of State Parliament when their courts
exercise federal jurisdiction.203
This observation is meaningful when considering the constitutional challenges to
the Corporations Act especially since this legislation is federal in nature but State-
based claims can be initiated in the Supreme Court as seen in Saraceni v Jones.204
This leads me to explore some of the constitutional challenges to the Corporation
Act, starting with an analysis of the Saraceni case which was based in Western
Australia.
202
James Stellios, 'Reconceiving the Separation of Judicial Power' (2011) 22 Public Law Review
113,125. 203
Ibid 126. 204
(2012) 24 WAR 518.
65
B. Examples of Constitutional challenges to the Corporations Act
1. The case of Saraceni v Jones
This case involved a constitutional challenge to the validity of ss 596A and 597 of
the Corporations Act as to whether the legislation had the power to order a court
in summoning a person for mandatory examination.205
The facts of the case
involved the applicant (Mr Saraceni), who was the director of the companies
Newport Securities Pty Ltd (Newport), Mayport Nominees Pty Ltd (Mayport) and
Seaport Pty Ltd (Seaport), in an attempt to invalidate the Supreme Court orders
for the issue of examination summonses under s 596A of the Corporations Act.
The respondents were receivers appointed by BankWest which held various
securities over the assets of Newport, Mayport and Seaport. In essence, this was a
contest to determine whether the legislature had gone beyond its authority by
conferring the powers of examination on a Chapter III court, which may be
characterised as outside the scope of judicial powers.206
Although the result was a unanimous decision that held the provisions to be
constitutionally valid, different reasons were given for the judgment from Martin
CJ and Mcclure P with Newnes JA in agreement. According to Martin CJ,
when a question arises as to whether the Commonwealth Parliament
has exceeded its legislative powers by purporting to confer non-
judicial powers or functions upon a court, a number of considerations
205
Corporations Act 2001 (Cth) – Part 5.9 – Division 1: Examining a person about a corporation.
s 596A has a heading of ‘Mandatory examination’. It requires a court to summon a person to
appear before it for examination about a corporation’s examinable affairs. 206
Saraceni v Jones (20102) 42 WAR 518, 526 [23] – Martin CJ.
66
support the view that a broader, rather than a narrower approach
should be taken to the characterisation of judicial power.207
In characterising judicial power, Martin CJ acknowledges the principles
established in Kable where it ‘denies the parliaments of the States the power to
confer functions or powers upon State courts which are inconsistent with the
integrity of those courts as repositories of Commonwealth judicial power’.208
However, he states that there is no exhaustive definition of judicial power but
Parliament may occasionally confer powers upon a court that are not ‘peculiarly
or distinctly legislative, executive or judicial, [which] may take its character from
the character of the body in which the power is reposed (the “chameleon”
principle)’.209
In a dissection of the examination powers under the Corporations
Act, Martin CJ concluded that the provision was valid as it did not abrogate the
role of the court in deciding whether to order such an examination and thus it does
not turn the court into ‘an instrument of injustice or oppression’.210
In contrast, McLure P suggested that ‘the real issue in this case is whether the
exercise of the examination power …is incidental to the mere existence of the
court’s general control and supervisory powers’. She concluded that the
provisions in question are valid because it is ‘within the judicial power of the
Commonwealth… as the examination power … is analogous to the examination
power historically conferred on courts in relation to corporations in liquidation.’211
207
Ibid 523 [6]. 208
Ibid [5]. 209
Ibid [10]. 210
Ibid 534 [65]. 211
Ibid 563 [237]. McLure P explains that the examination power in the current provisions is
‘simply a reflection of developments in the law providing for and regulating modern forms of
external administration in much the same way as the historical examination powers in bankruptcy
67
It is interesting to recognise that McLure P did not centre her judgment on the
Kable principle.212
Perhaps it is because the reliance on using the Kable principle
to instigate a successful constitutional challenge has passed its use-by date,213
especially since previous challenges based on this claim have been unpredictable.
Nevertheless, this marks yet another failed attempt in mounting a successful
constitutional challenge to a provision of the Corporations Act.
2. The case of Visnic v ASIC
Given the lack of cases that pursue a constitutional challenge to provisions of the
Corporations Act, Visnic v ASIC 214
is perhaps one of the few High Court cases so
far that presents an argument on the constitutional validity of a provision in the
Corporations Act which relates to the contravention of a civil penalty provision.
The facts of the case are that ASIC served the plaintiff (Mr Visnic, who was
director of fourteen corporations) with a notice of disqualification from managing
corporations for five years under s 206F of the Corporations Act. Mr Visnic
sought special leave from the High Court to challenge the constitutional validity
of s 206F,215
claiming that the disqualification decision by ASIC should be null
were extended to developments in the law relating to the existence and winding up of the newly
created separate, artificial, corporate personality with limited liability. It is an appropriate power
to confer on a court’. [at 236]. 212
Ibid 536 [81]. Although McLure P did repeat the well-established separation of powers
principle in that the ‘Commonwealth Parliament cannot confer upon a State court when exercising
federal jurisdiction any function that is not within the judicial power of the Commonwealth or not
ancillary to the exercise of judicial power’ – citing Gould v Brown (1998) 193 CLR 346 at
[59],[61],[115]-[116]. 213
Forge v ASIC (2006) 228 CLR 45, 125 at [203] – Kirby J contends that ‘… so far, the Kable
doctrine, although often invoked, has not resulted in the invalidation of many State laws. Apart
from in Kable itself, the only other instance in which the principle has been applied was in
Queensland …’ 214
(2007) 231 CLR 381. 215
s 206F of the Corporations Act (2001) (Cth) states that: subsection(1) ASIC may disqualify a
person from managing corporations for up to 5 years if: (a) within 7 years immediate before ASIC
68
and void. It was argued by the plaintiff that s 206F of the Corporations Act
conferred a judicial power on the Australian Securities and Investments
Commission in order to allow the Commission in making a disqualification order.
He claimed that this is an infringement of Chapter III of the Constitution given
that the Commission is not a Court but has the ability to make a disqualification
order, which is considered to be a penalty and thus such punitive power should
remain exclusively in the domains of a court.216
In reply, the defendant (ASIC) submitted that the disqualification power is not
punitive by reference to the High Court decision of Rich v ASIC. 217
Additionally,
ASIC claimed that the power to disqualify is intended to address ‘an obvious
public policy issue … [as to] whether the community needs protection from the
business practices of that director. It does not suggest any wrongdoing but it may
invoke the reasonable belief that that director is not good at conducting
business.’218
The High Court’s decision was a unanimous rejection to the
plaintiff’s claim that s 206F was invalid by virtue of the fact that the exercise of
gives a notice under paragraph (b)(i): (i) the person has been an officer of 2 or more corporations;
and (ii) while the person was an officer, or within 12 months after the person ceased to be an
officer of those corporations, each of the corporations was wound up and a liquidator lodged a
report under subsection 533(1) about the corporation’s inability to pay its debts; and (b) ASIC has
given the person: (i) a notice in the prescribed form requiring them to demonstrate why they
should not be disqualified; and (ii) an opportunity to be heard on the question; and (c) ASIC is
satisfied that the disqualification is justified. Subsection (2): In determining whether
disqualification is justified. ASIC: (a) must have regard to whether any of the corporations
mentioned in subsection (1) were related to one another; and (b) may have regard to: (i) the
person’s conduct in relation to the management, business or property of any corporation; and (ii)
whether the disqualification would be in the public interest; and (ii) any other matters that ASIC
considers appropriate. (Emphasis added). 216
Ibid 382. Submission by plaintiff’s counsel: A W Street SC (with G D Wendler and J S
Emmett). The arguments presented in this case mirrors those in Albarran v Companies Auditors
and Liquidators Disciplinary Board; Gould v Magarey (2007) 231 CLR 350, where it was argued
that s 1292(2) of the Corporations Act conferred power on the Companies Auditors and
Liquidators Disciplinary Board in that it possessed a power to impose a penalty or otherwise to
punish a person, which was exclusively part of the judicial power of the Commonwealth and thus
cannot be exercised by the Board. 217
(2004) 220 CLR 129. Previously discussed in detail of Part I of this thesis. 218
Ibid. Submission by defendant (HC Burmester QC with G M Aitken for the Attorney-General
for the Commonwealth).
69
such a power by ASIC is seen to be for the purpose of ‘maintaining professional
standards in the public interest’ 219
and not as an exercise of the judicial power of
the Commonwealth.
The reasons given by Gleeson CJ, Gummow, Hayne, Callinan, Heydon and
Crennan JJ centred on rejecting the plaintiff’s submission because ‘the criteria
stipulated for the exercise of power by ASIC and by the courts differ and do so to
a significant degree.’220
The court cited the decision from Precision Data
Holdings Ltd v Wills,221
and suggested that by analogy, the powers given to ASIC
can be compared to those given to tribunals, which have the function of making
orders and creating new rights and obligations, but do not pertain to the exercise
of judicial power.222
Although Kirby J agreed with the majority decision, he gave
more merit to the plaintiff’s argument in that s 206F may contravene the
fundamental constitutional principle because:
1) it left the decision on whether the jurisdiction of Ch III courts was
engaged at all to a regulatory body which was scarcely neutral as to
the outcome of its own determinations;
2) it allowed the regulatory body…to bypass the courts completely,
thereby depriving the officer of the corporation … concerned of the
facilities afforded by the courts, including the determination of
controversies by an independent and impartial decision-maker…
3) it allowed the executive government regulator to become the
effective decision-maker of its own accusation without permitting the
officer of the corporation affected the privilege of having such a
219
Ibid 381. 220
Ibid 385 [13]. 221
(1991) 173 CLR 167,191. 222
Visnic v ASIC (2007) 231 CLR 381, 386.
70
significant public “punishment” determined by a decision-maker
distinct and removed from the regulator…
4) the “disqualification” which ASIC was permitted to determine was in
the nature of an injunction forbidding the person disqualified from
continuing to earn his or her living as an officer of corporations.
Determinations of that character were, so the plaintiff submitted,
judicial in their essential character. They could not be vested in an
executive government body such as ASIC.223
With good reason, these points raised by the plaintiff illustrate the issue of
whether s 206F ought to give such wide powers of disqualification to ASIC,
which appears to act like an injunction order from a court. However, as Kirby J
went on to reason, given that ASIC is meant to be the corporate ‘watchdog’, it
would be difficult for it to show impartiality and independence like a court, but
this element in itself may not be enough to constitute a sufficient ground to signify
constitutional invalidity.224
He thus concludes that the legislation is valid because
‘ASIC’s decision is not conclusive or enforceable…but forms a basis…for
curially enforceable rights and liabilities; and that ASIC’s powers could not fairly
be characterised as determining “basic legal rights” of the kind that must always
be reserved to a Ch III court.’225
Hence the constitutional challenge in this case
raised a different point to that of the Kable principle, as it presented an unusual
kind of interference by parliament into the role of the judiciary by conferring a
power onto an executive body which had some elements of judicial control.
Nevertheless, Kirby J describes this as a feature of ‘contemporary public
223
Ibid 392. 224
Ibid 394. 225
Ibid 395 [46].
71
administration’,226
rather than an exercise of judicial power, and thus the
constitutional validity of the legislation is narrowly preserved.
C. Potential dangers for future drafting or amendments to civil penalty
provisions in the Corporations Act
It is important to understand the theories used to identify the constitutional
restraints that are placed on drafting a piece of legislation. If parliament is to
amend or draft more civil penalty provisions in the Corporations Act, it must take
care not to offend Chapter III of the Constitution by violating the separation of
powers doctrine and turning the court into an instrument of the executive. So far,
the actual civil penalty provisions in the Corporations Act 227
have not been
challenged constitutionally. This could be due to the fact that the current
provisions allow the court the discretion to make a pecuniary penalty order
without any mandatory imposition.228
It should be highlighted that the Act also
confers powers to the court to order pecuniary penalties (s 1317G) as well as
disqualification orders (s 206C), which appears on its face to be punitive in nature.
In ASIC v Ingleby, 229
Weinberg JA took the liberty to explore the meaning of the
term ‘penalty’ within the context of the civil penalty provisions and suggested that
they
226
Ibid. 227
s 1317E of the Corporations Act 2001 (Cth) lists all the subsections which are considered to be
civil penalty provisions. 228
s 1317G(1) of the Corporations Act 2001 (Cth) states that: A court may order a person to pay
the Commonwealth a pecuniary penalty of up to $200,000 … (emphasis added). 229
[2013] VSCA 49.
72
operate as sanctions [and] represent an exercise of state power. They
differ from what might be termed ‘criminal penalties’ in that they are
normally imposed by courts applying civil, rather than criminal, court
processes. In practical terms, however, they closely resemble fines,
and other punishments imposed upon criminal offenders. … [Although
they] have been described as a ‘hybrid between the criminal and the
civil law’. They are founded on the notion of preventing or punishing
public harm. Often, the contravention that they are intended to meet is
itself similar to a criminal offence, and many of the ordinary principles
that govern sentencing for such offences are equally applicable to such
civil penalties… There is, however, a fundamental distinction between
criminal and civil penalties. There are no federal civil penalty
provisions that include a term of imprisonment as an aspect of the
penalty. It is doubtful that any such penalty would withstand
constitutional scrutiny.230
This passage draws attention to the fact that, conceptually, civil penalties are
different to criminal penalties even though they can still have a punitive effect.
Yet they are still civil in nature and will not withstand the test of a constitutional
challenge if a harsher form of punishment, such as imprisonment, were to be
incorporated into its regime. In comparison, the disqualification orders by the
court have been described to provide a protective effect on the public as it
disallows the individual to run a corporation that is contrary to commercial
standards.231
The question then arises if civil penalties are accepted as a form of
civil redress for corporate wrongdoing only then amendments to the existing civil
penalty provisions is unlikely to survive a constitutional challenge if a punitive
order is imposed mandatorily.
230
Ibid 50 [5]-[6]. 231
ASC v Donovan (1998) 28 ACSR 583; Rich v ASIC (2004) 220 CLR 129.
73
The theme that ruminates through some of the judgements like Visnic and
Albarran and Gould is that the determination of guilt, as well as the existence of
rights and obligations, is an exclusive judicial function. But there is a substantive
difference between a disciplinary action and the proceedings of a criminal court.232
Hence creating an argument to suggest that a disqualification order is punitive,
much like that of an imprisonment term for committing an offence, would most
likely fail the test of constitutional scrutiny. For example, if civil penalties are
viewed as a form of quasi-criminal provision, then mandatory imposition of a
disqualification order by the court will undoubtedly be challenged under the
separation of powers doctrine as unconstitutional. It would be as though there is a
mandatory ‘sentencing’ of a punishment by taking away the individual’s right to
act as a director for a corporation. Supposedly, the ‘unconstitutionality of
particular mandatory sentencing arrangements is their denial of a meaningful role
for the judiciary in the sentencing process. This, it is argued, subverts the rule of
law and is an example of the legislature requiring the courts to act in a manner
which is incompatible with the judicial process.’233
However, could the same be
said if civil penalties are viewed as entirely civil? In that case, a disqualification
order may be seen as a protective and preventative order (similar to the arguments
raised by the Attorney-General in Fardon 234
) and not as a form of personal
punishment. The issue then becomes whether the mandatory disqualification
orders are seen to protect the community and should be allowed for the sake of
public interest (like the arguments raised by ASIC in Visnic 235
).
232
Albarran v Companies Auditors and Liquidators Disciplinary Board; Gould v Magarey (2007)
231 CLR 350, 358 [16]-[17]; R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty
Ltd (1970) 123 CLR 361,374-375. 233
Peter A Sallmann, 'Mandatory Sentencing: A Bird's-Eye View' (2005) 14 Journal of Judicial
Administration 177,184. 234
Fardon v Attorney-General (Qld)(2004) 223 CLR 575. See discussion in IIA about the case. 235
Visnic v ASIC (2007) 231 CLR 381. See discussion in IIB about the case.
74
Finally, if civil penalties are to be recognised as a substantive branch of law due to
their unique hybrid characteristics, this prevents them from being classified as
neither civil nor criminal. Then it should not matter whether the penalties are
defined as punitive or not, as the jurisprudence should develop to enable a new
classification in due course. However, drafting or amending future civil penalty
provisions will need to be strictly scrutinised under the rule of law and the
separation of powers doctrine. This is so that it can withstand the test of
constitutional challenges as discussed previously and hopefully avoid the pitfalls
of being declared invalid by a court.
75
IV. CONCLUSION
By examining how civil penalties have emerged as a result of the blurring between
the criminal and civil positions of law, it is envisaged that the jurisprudence
surrounding civil penalties will continue to evolve and play a major role in the
future of Australian law. However, the effectiveness of civil penalties as a type of
mid-range sanction for the regulation of corporate behaviour is at best
questionable. This is especially so when ASIC has failed to prove some of its
major cases under civil penalty proceedings. Notwithstanding that most civil
penalty trials are inherently highly complex in nature, the unsuccessful attempts of
ASIC in securing a declaration from the court could be attributed to the fact that
civil procedures were used to try these cases. It is argued that civil procedure
lacks the ability to balance the quasi-criminal effects of the ‘penalty’ element of
the civil penalties. This is particularly evident when it becomes difficult to
classify whether the statutory proceedings fall into civil or criminal procedure.236
Arguably, this difficulty could be due to the fact that civil penalties exhibit hybrid
qualities of both criminal and civil law. The argument further perpetuates as to
whether the penalties orders, such as disqualification orders, are deemed as
punitive or protective in nature.
Nevertheless, it appears that such a discussion is unproductive. Hence proposing
to re-identifying civil penalties as a unique branch of law given its substantive
effect, instead of being just a regulatory tool, could prompt parliament into
enacting a new set of procedures for civil penalty proceedings under the
Corporations Act. If drafted with sufficient care, such a procedural rule could
236
Rich v ASIC (2004) 220 CLR 129, 168 [95].
76
eliminate the procedural issues which have plagued some of the civil penalty cases
in the past. This could involve the proposition of a new standard of proof which is
designed to reflect the seriousness of the contravention of civil penalties. Or it
could simply be a further development on the jurisprudence surrounding the
Briginshaw standard to the point where it could be considered as a third standard
of proof.
In any event, if parliamentary intervention does occur to amend or reclassify civil
penalties in the Corporations Act as a form of substantive law, then there is always
the potential danger of creating an unconstitutional provision if it removes the
discretion from the courts to exercise judicial power. On this note, it is important
to recognise that the High Court is re-developing the jurisprudence surrounding
the Kable doctrine and the separation of powers. It appears that this area of law is
highly unsettled and the decision as to whether the legislation becomes
constitutionally invalid could depend on various other principles that infringe upon
Chapter III of the Constitution. Ultimately though, any mandatory imposition of
penalties should automatically fail the test of constitutionality in theory, as it
would disregard the rule of law and breach one of the fundamental objectives
implied in our Constitution.
77
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85
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86
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Polyukhovic v Commonwealth (1991) 172 CLR 501
Poyser v Minors (1881) LR 7 QBD 329
Precision Data Holdings Ltd v Wills (1991) 173 CLR 167
Pyrenees Shire Council v Day (1998) 192 CLR 330
R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123
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87
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Todorovic v Waller (1981) 150 CLR 402
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Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189
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Witham v Holloway (1995) 183 CLR 525
88
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Corporations Act 2001 (Cth)
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Evidence Act 1995 (Cth)
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D Other
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Recommended